Editor’s note: The director of the Consumer Financial Protection Bureau issued a statement announcing a delay in the implementation of the new TILA-RESPA integrated disclosures until October 1, 2015.
Big changes are on the way that will impact real estate agents, lenders, buyers and sellers alike. The HUD-1 is out come August 1, and the Closing Disclosure form (CDF) is in.
A new form inevitably means new procedures and deadlines to observe, which is why we’ve put together this list of things we think are most important to know about the new regulations.
1. The lender – not the settlement agent – will in most cases be preparing and delivering the CDF, which will be used to most loan applications taken for new mortgages after August 1, 2015.
2. The CDF must be delivered to the buyer/consumer at least three business days prior to the scheduled closing date.
3. The settlement agent must deliver information to the lender approximately 10 to 14 days prior to the closing date for completion of CDF to meet the delivery requirement.
• You will need to communicate to the closing agent all your buyer charges and credits 10 to 14 days prior to the closing date. (Federal Title has simplified this communication by emailing you and your homebuyer a link to an easy-to-complete online form as soon as we receive the new transaction order.)
4. The settlement agent will need your real estate broker’s state license number and your individual real estate license number for the new CDF.
• Federal Title stores license numbers for most brokers and agents in their respective profiles within our WorkFlow system, saving agents time and effort involved in communicating this information each time Federal Title receives a new transaction order.
5. The CDF sent to the buyer/consumer won’t include the seller’s side of the transaction.
• The settlement agent (not the lender) is responsible for completing and delivering the seller’s side of the CDF. (Federal Title will prepare and deliver a separate CDF and/or settlement statement to the seller well in advance of the closing date.)
6. You likely won’t receive an advance copy of the CDF from the lender before it’s delivered to the buyer/consumer.
• The lender will likely send the CDF to the settlement agent when it’s sent to the buyer/consumer.
• The settlement agent will probably not be permitted to send a copy to real estate agents; you will need to obtain a copy from the borrower.
7. Changes to the CDF after delivery to the buyer/consumer MAY trigger a new three-day waiting period if changes cause the Annual Percentage Rate (APR) to be inaccurate, the buyer changes loan product or a prepayment penalty is added.
• Changes and adjustments affecting the value of the property (as determined by the lender) may trigger additional disclosure and review periods under the Equal Credit Opportunity Act (ECOA) controlling the delivery of the appraisals.
• You may want to consider two pre-settlement inspections or walk-throughs (e.g., first inspection 7 to 10 days in advance of closing and a second inspection on the day of the closing).
8. Review and become familiar with the CDF so that you can answer buyer and seller questions. Note the CDF refers to Owner’s Title Insurance as optional in some circumstances. Obtain appropriate advice for the buyer/consumer on the protections given to them through owner’s title insurance.
• Federal Title’s Close It! calculator application is a perfect resource for gaining familiarity with the new CDF.
9. The new TILA-RESPA Integrated Disclosure (TRID) rules may affect the contract terms that you help negotiate for either the buyer or the seller. It’s important to communicate with the lender and closing agent to determine a realistic time frame for closings under these new rules.
• For example, a closing 20 days out or less may no longer be realistic.
• When specifying the closing date, take additional time into consideration.
10. What system do you have in place to communicate changes to the contract (after it’s been signed) to the lender? Consider having a conversation with buyers about the high importance of timely responses to lender requests, and remind sellers they must follow the contract to the letter because not doing so may delay the closing.