The Consumer Financial Protection Bureau has announced the October 3 start date for the new TILA-RESPA Integrated Disclosure (TRID) rule. The new disclosure first combines, the Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosure (initial TIL) have been combined into a new form, the Loan Estimate. Second, the HUD-1 and final Truth-in-Lending disclosure have been combined into another new form, the Closing Disclosure.
How will this affect my loan?
For those buyers who will be using financing for the purchase of their home, this Closing Disclosure will have a significant impact. It is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction. And although, this simplification of information will be a benefit to Buyers. The critical point is that the Closing Disclosure form must be provided to consumers at least three business days before consummation of the loan.
In plain English, this means that any transaction with a loan will be delayed for 3-6 business days from today's closing timelines. Three days is the minimum requirement for the Buyer to review and accept the Closing Disclosure. This minimum applies if the document is delivered by personal service. If the document is delivered by mail, there is another 3 days tacked on for the document to be deemed to have been received.
Also, if any changes are made to the material terms of the loan, a NEW 3-day review may be required. This could cause an even greater delay in closing time periods. The three particular changes that would require a new review are the following:
The APR (annual percentage rate) increases by more than 1/8 of a percent for fixed-rate loans or 1/4 of a percent for adjustable loans. A decrease in APR will not require a new 3-day review if it is based on changes to interest rate or other fees.
A prepayment penalty is added, making it expensive to refinance or sell.
The basic loan product changes, such as a switch from fixed rate to adjustable interest rate or to a loan with interest-only payments.
In summary, the new disclosure requirement will result in no less than 3 additional days before a buyer is able to close on a loan. The 3 days are business days, which in real estate terms can be a huge delay when the market is demanding 14-17 calendar day close of escrows. It will be an adjustment for both Buyers, Sellers, agents, lenders and escrow officers in this market. Behind the scenes, real estate professionals have been working hard to make the implementation of this new rule as seamless as possible.