As you know, on October 3, 2015, the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure Rule (the “TRID Rule”) goes into effect and will introduce a new era of real estate closings for most residential mortgages.
For a brief history, the CFPB was created in 2010 as a result of Dodd-Frank Act. Their main objective is to actively educate and protect the consumer. Many who have heard of CFPB think that the new rules and enforcement of the new rules do not apply to them. But, many are mistaken in thinking that the CFPB has no jurisdiction over mortgage brokers, mortgage bankers, settlement providers and real estate brokers. The Bureau has supervision over banks and non-banks and has broad powers and enforcement authority over both RESPA and TILA. CFPB has already used their broad powers in enforcement actions across every type of industry participant.
The new TRID rule will work to improve this experience. To briefly summarize the new TRID Rule:
1. The Loan Estimate and Closing Disclosure will replace the Good Faith Estimate (GFE), Truth in Lending disclosures (TIL) and HUD-1 Settlement Statement (HUD-1) for most types of transactions.
2. The Closing Disclosure (CD) will be provided by either the lender or settlement agent and must be received by the borrower at least three business days before consummation.
3. The Closing Disclosure must be revised by closing if the information on the initial CD changes. If certain terms change (loan product, prepayment penalty, APR increase beyond threshold), closing cannot occur until three business days after the borrower receives the revised Closing Disclosure. This may result in closing delays under certain circumstances.
So what does this mean to you?
• Your real estate closing and processes will soon be changing.
• Lenders will largely be the ones to prepare the Closing Disclosure.
• The escrow/settlement agent will likely prepare a Settlement Statement.
• Estimates provided to the consumer by third-party providers must be accurate.
• REALTORS® will need to be able to explain new forms to buyers.
• REALTORS® may have to get permission from buyers to release Closing Disclosure.
• Same-day closings may be risky per some lenders.
• Lenders are no longer allowing the settlement agent to “fix” lender errors.
• Lenders may place more focus on approved provider lists.
How can you be prepared?
We are now in the implementation period until October 3, 2015. Here are some suggestions for possible next steps for you and your teams.
• Be proactive
• Collaborate – Lenders, REALTORS®, Closers
• Identify process changes
• Plan for the three-day rule
• Print the new disclosures
• Practice with your team
• Invite your compliance officer
The challenge for all of us will be to ensure that the process goes off without a hitch for the borrower to ensure the industry and CFPB accomplish their goal of improving the consumer experience.
Marvin Stone is CFPB program manager, Stewart®.
For more information, visit www.stewart.com/cfpb.