My New Outside Blog: TILA-RESPA Integrated Disclosure Extended Closings

TILA-RESPA Integrated Disclosure Extended Closings

TILA-RESPA Integrated Disclosure Extended Closings

Real estate closings in the Huntsville, Alabama area as with the rest of the country are expected to takeTILA-RESPA Integrated Disclosure Extended Closings longer after October, 3 2015. If time is an issue for you then consider making that offer on a new home and going under contract before the October, 3 deadline.

This year, the Consumer Financial Protection Bureau (CFPB) begins requiring banks to provide consumers with a longer window in which to review loan documentation. The new rule, potentially in effect October3, 2015 can push closings by as many as six days-to more than a week - longer than usual. Most lenders and closing attorneys I talk to suggest a 45 day closing time frame to be safe. Buyers needing to close quickly may need to begin negotiations sooner in order to meet a move-in deadline.

On the other hand, the changes could give an advantage to all-cash buyers over those needing conventional financing, since sellers looking to close quickly may choose a faster close over a higher net. In a hot seller's market, cash may be king for the buyer...it usually is.

The Ruling Explained:

Originally slated to roll out August 1, 2015 in October, the federal government will require that loan disclosure documents contain a combination of both the Real Estate Settlement Procedures Act (RESPA) and the Federal Truth in Lending Act (TILA) in a document known as the TILA-RESPA Integrated Disclosure (TRID). The ruling, known a "Know Before You Owe" must accompany the Loan Estimate and include all charges, fees and line items at least three (business) days before closing. In the past, this information was often given to consumers on the day of closing on the HUD-1 form (which no longer will be necessary).

The purpose of the changes is to mitigate the potential for surprises at the closing table and offers an advantage to buyers since any increase of more than one-eighth of a percent during the three-day window--or other changes such as pre-payment penalties, additional fees or other items that increase the consumer's financial responsibility--requires entirely new documentation and another three-day window (delay).  Note that a decrease in interest of fees will not cause such a delay.

According to the CFPB the new forms are easier to understand and use. During testing, participants returned more correct answers about their sample mortgage using the new forms as compared to the traditional forms. The new form lists the total loan amount, interest rate, monthly principal and interest and projected payments on the first page of the form. Closing costs and cash required to close appear at the bottom of the easy to read page.

Specifically, the first section on the front of the document clearly indicates if the amount of the loan, interest rate and monthly principal and interest can increase after the closing, and prepayment penalties and balloon payments are plainly indicated.

In the second section, projected payments for the life of the loan, including the years in which increases may occur, gives the buyer the needed information to plan for the future.

The primary advantage for home-buyers is that the three-day window allows them to walk away from a deal without penalty in certain circumstances and allows them to more quickly understand the terms of their mortgage.

A disadvantage for those needing to close quickly is that bankers, mortgage lenders, escrow officers and other real estate professionals will need to learn the new documentation and set up computer software and other systems to prepare it. I think all involved should expect delays or a few glitches in the beginning, but once we get used to these changes - and we will - things should once again run smoothly...until the next change!

If you have questions about the new forms and how to understand them, I would be glad to talk with you about them. You may call me or visit my real estate website anytime: MadisonAlabamaHomes.com

Photo courtesy of Fantasista/Freedigitalphotos.net 

Content adapted from original post published at….http://nicktpappas.com/?p=3825

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Comment balloon 24 commentsNick T Pappas • August 07 2015 07:23AM

Comments

Hello Nick, great and timely post, October is just around the corner, I really do hope everyone who's involved is preperated for all the changes!

Posted by Beth Atalay, Cam Realty of Clermont FL (Cam Realty and Property Management) about 2 years ago

Already working with my main mortage broker to stay up to date and make sure business keeps going as smoothly as possible with the big changes. October will be an interesting month in our business.

Posted by Stefan Winter, Owner - Winter Group & Real Estate Web Tech (Real Estate in IL & NV | Owner of Real Estate Web Tech | Daily Vlogger) about 2 years ago

Nick I like the new forms, it is the 3 day requirement between the Loan Disclosure being given to the Buyer and the Closing that has me concerned.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 2 years ago

 George Souto, that is also my concern, I think it's going to be a bit of a problem until we get used to it or work more efficiently bringing the 30 day closing back even with the changes. 

Posted by Nick T Pappas, Madison & Huntsville Alabama Real Estate Resource (Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Huntsville AL) about 2 years ago

Nick the new forms are easier to read, but the delays with the 3 days and even worse for someone that needs to close on the sale of a home before they move to the next closing will be a boon for storage companies

Posted by Ed Silva, Central CT Real Estate Broker Serving all equally (RE/MAX Professionals, CT 203-206-0754 ) about 2 years ago

Hi, Nick. I've already taken a class on the new changes. This is the best explanation I've read yet! It's even better than the class I took. Nice work on this post. This should get featured. 

Posted by Debbie Laity, Your Real Estate Resource for Delta County, CO (Cedaredge Land Company) about 2 years ago

Nick - Many people will be happy TILA RESPA integrated Disclosure closing extended. Excellent report.

Posted by John Pusa, Your All Time Realtor With Exceptional Service (Berkshire Hathaway Home Services Crest) about 2 years ago

Good morning Nick. Nice job with your post and certainly a timely topic. It will be a challenge early on as there are a lot of moving parts. There will be some delays, but we'll work through them.

Make it a great weekend!

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) about 2 years ago

Hi Nick.  Excellent information and a heads up for the changes coming this fall.

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) about 2 years ago

I hope consumers will read this post.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) about 2 years ago

Nick

Both real estate professionals and consumers will find your post informative regarding the new TILA-RESPA guildlines . . . . very helpful.

Good luck and success.

Lou Ludwig

Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) about 2 years ago

Nick T Pappas - this surely will help buyers in some situations. I have had closings where buyers hardly got a time to look at HUD and had to sign the closing documents despite.

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (eXp Realty) about 2 years ago

This is a great explanation of the guidelines, thanks for posting. is it featured yet??

Posted by Rebecca Gaujot, Lewisburg WV, the go to agent for all real estate (Perry Wellington Realty) about 2 years ago

I am attedning another class on this on Monday and that will make 3. I want to be ready and fully understand what is coming our way. Nice post Nick.

Posted by Debbie Reynolds, Your Dedicated Clarksville TN Real Estate Agent (Platinum Properties) about 2 years ago

Nick,

 That deadline is fast approaching I wish they would push it to next year as people may miss the deadline for Homestead exemption here in Texas if there is a delay at the end of the year!

Posted by Yolanda Cordova-Gilbert, Sitterle Homes (Sitterle Homes) about 2 years ago

Hello Nick T Pappas 

The three-day prior is the problem and in my opinion, ridiculous - extending closings (oops, now the government calls them consummations) is going to be a nightmare and both buyers and sellers are going to be upset.

Posted by Lisa Von Domek, ....Experience Isn't Expensive.... It's Priceless! (Lisa Von Domek & Associates LLC Team) about 2 years ago

Thanks all for your comments. We will, of course get used to the changes in time, but I think they should quit extending and just implement the change allowing a grace period for mistakes and issues, especially since there will be fines/penalties directed mostly I believe at closing attorney's and possibly lenders...maybe a great mortgage expert like George Souto or Joe Petrowsky would weigh in on this point. 

Posted by Nick T Pappas, Madison & Huntsville Alabama Real Estate Resource (Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Huntsville AL) about 2 years ago

Good morning Nick. I am not overly concerned about fines, as there is not going to be folks that intentionally screw this process up, as I have already shared, it will be a learning process and all of us will work through it.

Educating our buyers, seller and mortgage clients will be very important.

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) about 2 years ago

Great and clear explanation of the timeframes we will all experience.  I worry about the last minute oil reads & such and we will need to come up with better ways, Nick.

Posted by Ginny Gorman, Homes for Sale in North Kingstown RI and beyond (RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate) about 2 years ago

At least they had the good sense to come out with this toward the tail end of the fall market and not right at the beginning of the spring market. By next spring, I hope most of the kinks will be worked out. It would not surprise me for now to see buyers going into escrow in October and not closing until Christmas.

Posted by Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents, Put 40 years of experience to work for you (Lyon Real Estate) about 2 years ago

Nick, this will be a HUGE change on closings, and this will all take place soon, if they do not extend the date again.

Posted by Joan Cox, Denver Real Estate - Selling One Home at a Time (Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373) about 2 years ago

Nick thank you for the update.  Yes, we will have to adjust our schedules a bit and yes it will be an issue at times, that being said it may be a good thing if it ever really happens.  In our area, most of the title companies have already made the changes in preparation and things seem to be going pretty well.

Posted by Anna Hatridge, Missouri Realtor with Goodson Realty (Goodson Realty) about 2 years ago

This is good information to share with prospective home buyers and home sellers.

Posted by Roy Kelley, Roy and Dolores Kelley Photographs (Realty Group Referrals) about 2 years ago

I think lenders and closing attorney's are prepared for this, but I still think there should be a grace period once the TRID goes into effect before any fines are strictly enforced.

Posted by Nick T Pappas, Madison & Huntsville Alabama Real Estate Resource (Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Huntsville AL) about 2 years ago

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