The Good Faith Estimate and the HUD-1 settlement statement will go away on most closed-end consumer purpose loans secured by residential real estate. These documents will be replaced by the “Loan Estimate” and the “Closing Disclosure.” These new documents are referred to as the TILA-RESPA Integrated Disclosures (TRID for short). These disclosure must be provided to the consumer three days before closing.
The purpose of these changes is to improve the mortgage loan settlement process for consumers. They are being implemented by regulations issued by the Consumer Financial Protection Bureau (CFPB), a federal government agency set up to look out for the interests of consumers seeking financial services.
Following are some main points you should know:
1. How will the new rules affect the closing dates on purchase agreements? The National Association of Realtors (“NAR”) is recommending that 15 days be added to the purchase contract. So for example, if you customarily have a purchase contract that requires closing within 30 days, under TRID it is recommended that you now require closing within 45 days. A link to the NAR video is provided here: NAR video on TRID
2. How does TRID affect the seller? Under TRID the seller will now receive a separate Closing Disclosure that is prepared by the settlement agent. The settlement agent must deliver the Closing Disclosure to the seller 1 day prior to settlement (consummation).
3. How will this affect my settlement (consummation) date? For purchasers, it will be important that you work closely with your lender regarding approval of the loan and coordination of final walk-through with the realtor. Some contracts may increase from a 30 day requirement to settle to a 45 day requirement to settle which means move-outs, subsequent settlements and other relocation tasks may need to be adjusted to ensure a seamless transition into your new home. For consumers refinancing, you will need to ensure any loan changes such as adjusting the loan amount or changing loan products is discussed in advance with the lender to avoid re-disclosure of the Closing Disclosure once issued.
4. What will the new Loan Estimate and Closing Disclosure look like? Samples of the disclosure can be found on the CFPB website. Link to new disclosures.
It is important that you work with a mortgage professional who has full knowledge of the various changes so that the closing will go smoothly. Should you have any questions regarding any of the up coming changes, feel free to contact me.
