Good To Know
HOW MUCH DO YOUR CLIENTS KNOW ABOUT THE CLOSING PROCESS?
The TILA-RESPA Integrated Disclosure rule, also known as “TRID,” has been talked about a lot, and by now you are probably familiar with many of the changes. But how well are your clients educated on the impact of TRID?
Here are the key facets in today’s real estate transaction that every buyer and seller should understand:
The Loan Estimate
Once an actual offer is made and accepted, the buyer’s lender will create a Loan Estimate in line with the terms and conditions related to the fi¬nancing of the pending transaction. If your buyer gets prequalifi¬ed for a mortgage, they will get a prequalifi¬cation letter and likely will not get the new loan estimate at that time. Some lenders may choose to do a preliminary loan estimate, though it is not required with a mortgage prequali¬fication.
The Closing Disclosure
Assuming all goes well with inspections and other aspects of the process, regulations known as TILA-RESPA requirements require a specific form called the Closing Disclosure. The Closing Disclosure looks a lot like the Loan Estimate, and this is by design to ensure that the consumer has an easier experience overall understanding their transaction from start to fi¬nish. The Closing Disclosure replaces an earlier document known as HUD-1.
The New Timeframe
In the new post-TRID world, the borrower must receive their Closing Disclosure three days prior to closing to give ample time to review the documents (legal public holidays and Sundays don’t count in that timeframe). Make sure your client understands what each line item represents and that special attention is paid to closing terms and fees.
Changes That Affect The Timeframe
Under the existing rules, there are only three changes that require a new three-day review period and could potentially impact the closing date:
A. The APR increases by more than 1/8 of a percent for fi¬xed-rate loans, or ¼ of a percent for adjustable-rate loans
B. A prepayment penalty is added
C. The basic loan product changes