The Grubb Company Responds to New Mortgage Rule

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New rule, named TRID, changes how mortgages operate, in hopes to clarify responsibilities, timelines and terminology.

Aimed at making mortgages more transparent and easier to understand for consumers, the Consumer Financial Protection Bureau (CFPB) has issued the TILA-RESPA Integrated Disclosure (TRID) rule. Also known as “Know Before You Owe,” the TRID rule changes how mortgages work by clarifying responsibilities, timelines and terminology.

The TRID rule makes the documents that buyers and sellers (now “consumers”) receive from lenders more consumer-friendly and easier to read. The Loan Estimate (LE) must be given to the consumer within three days of filing the loan application. The LE lays out all expected fees along with essential information such as interest rate, loan amount, and any prepayment penalties, balloon payments and/or points. The Closing Disclosure (CD) replaces the familiar Truth-In-Lending Disclosure and HUD-1 Settlement Statement.

According to Roger Smith, senior loan advisor at LaSalle Financial, this is a welcome change.

“The HUD-1 form in particular was very consumer un-friendly. The CD is much easier to read and understand,” he said.

The TRID rule also requires that the buyer have at least three days to review the CD prior to closing, compared to the current one day or, in some cases, just hours before closing… and therein lies the heart of concerns about the transition to TRID. Once the CD has been received, any changes to the docs will require a new CD and reset the three-day countdown before final docs can be signed. Examples include changing from a fixed to an adjustable rate loan, a rate change, or a final walk-through that reveals a stained carpet where the seller agrees to credit $1,000 to the buyer.

“We are continually being educated about the TRID process. Agents today need to have a succinct calendar in order to close an escrow on time. TRID is a hard-wired format that needs to be followed through with the agent, buyer and lender,” said DJ Grubb, president of The Grubb Company.

There is one additional feature of the TRID rule that will take some getting used to. The lender will now be responsible for drafting and delivering the CD rather than the title company. And, if the lender does not deliver documents on time or issue correct fees, they may be held liable. This is a major change and will directly affect the lending and settlement processes. As some roles are shifted from the title company to the lender there will no doubt be a few growing pains.

Given the changes, here are a few things to keep in mind:

  • As a buyer, lock in the interest rate and lock it in for a longer period of time. Because of the new rules, closings could be delayed (at least initially). Make sure to speak with the lender about the best way to avoid delays with a locked rate.
  • Build in more time for back-to-back closings. If planning to sell a home and purchase a new one successively, keep in mind things may take longer on both sides. Work in a few extra days on both ends to be sure there is enough time to iron out any situations that may arise.

The TRID rule probably spells the end of the 30-day close. On the other hand, home buyers will now have access to more accurate information, ample time to shop for loans and more time to review clearer closing documents. Remember the three-day rule, and plan accordingly.

For more information about The Grubb Company, please visit http://www.grubbco.com.

About the company:
The Grubb Co Realtors is a full-service real estate firm, offering their clients a smooth and professional real estate experience. With more than 44 years in the business, The Grubb Company knows that a high level of service ensures the satisfaction of their clients. They have a foundation of discipline, accountability and teamwork that sets them apart from other real estate firms in the area. The Grubb Company is committed to providing their clients with the best agents, the best service and the best houses around. To learn more, visit their website at http://www.grubbco.com/.

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Susan Kline