“Know Before You Own” Changes Delayed

By Ryan Dosen

 

The powers that be in the real estate industry have managed to kick the can and delay the significant changes that are coming for real estate settlements and settlement paperwork. Changes were slated to begin on August 1, 2015. We learned on Thursday that the effective date of the mandated changes will be bumped back at least two months to October 1, 2015.

Representatives from the National Association of Realtors (NAR), Mortgage Bankers Association (MBA), and other real estate-related organizations laud the decision to delay the inevitable, generally citing the need for additional time for professionals to adjust to and prepare for the soon-to-be-mandated changes. MBA President and CEO David H. Stevens says that “the complexity of this rule, which impacts not just mortgage disclosures but also the business processes behind the entire real estate transaction, warrants the additional time to get it right and ensure that consumers are not adversely effected by the transition.”

 

The New Rule and the Changes

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Consumer Financial Protection Bureau (CFRB) was tasked with the creation of newer, more easily understandable loan and settlement forms. The CFRB states that the old forms, including the Truth-in-Lending disclosure (TIL), Good Faith Estimate (GFE), and HUD-1 settlement statement, were considered “confusing” and that “lenders and settlement agents find the forms burdensome to provide and explain.”

As part of the new TILA-RESPA Integrated Disclosures (TRID), a new Loan Estimate (LE) will replace the GFE and initial TIL. The new Loan Estimate “is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying, and must be provided to consumers no later than the third business day after they submit a loan application.”

Also as a part of TRID, a new Closing Disclosure (CD) will replace the HUD-1 settlement statement and the final TIL. This form “is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction.” This form must be given to consumers at least three days before closing.

 

Changes (Mostly) for the Better

It is not uncommon for closings to involve last-minute changes to the final terms or numbers. This all-too-common practice of real estate agents and mortgage pros waiting until the eleventh hour to hit consumers with their final numbers has been a problem for some time. Many had just accepted it as “the way things are done.” As a result, consumers were often put in the unfair position of having to either accept terms they didn’t understand or hadn’t fully processed, or walk away from an important deal in which they were heavily invested, both emotionally and financially.

The new changes on the horizon are coming to hopefully address this very issue. Consumers will have clearer disclosures and three days to fully digest and process the numbers.

This all sounds good, and in the long run it should be for the better. However, there will be growing pains. Unprepared real estate agents and mortgage professionals will inevitably not meet deadlines, but they will no longer be able to scurry to throw together a last-minute settlement.

The mandatory three-day waiting period, which is being put into place to protect consumers, is going to wind up putting a lot of consumers out of contract by making them miss their settlement dates. Mortgage professionals are going to miss deadlines or miss details, try to fix them after it’s too late, and everyone’s going to have to sit on their hands as closing dates pass during the mandatory waiting periods.

We will revisit this issue with insight from a local mortgage expert when the changes become more imminent; but if you wind up being one of the first TRID guinea pigs, you’re probably not going to want to try to pull off a quick 30-day settlement with one of the behemoth banks.

 

– Ryan Dosen manages The Wayne Megill Real Estate Team of Keller Williams – Brandywine Valley in West Chester, PA. Contact Ryan Dosen to inquire about buyer or seller representation or to learn more about a career in real estate by emailing ryan@waynemegillteam.com or calling 610-399-0338.

 

This article was published by 21st Century Media and the Daily Local News (West Chester, PA). To read this article on the the newspaper’s site, please visit the Daily Local News.

To view all of Ryan Dosen’s 21st Century Media real estate columns, visit http://www.dailylocal.com/search?text=dosen.