June 2015, Issue 06
TRID: At the Table
Some good news on the TRID front. Recently, the Consumer Financial Protection Bureau (CFPB) announced they will extend the implementation date of the new TRID rules until October 3, 2015. Whew, take breath. We got a slight reprieve. This should allow lenders and service providers the additional time they have been requesting to finalize their plans, processes and systems. Don't get too comfortable though, October will here before you know it. Think about it, we had 22 months to get ready for this and still needed more time. I wouldn't count on getting any more from the CFPB on the start date for the new rules to become effective. Let's get ready to rumble.
Everyone has been concentrating on getting the new forms in place to meet the new requirements. Technology providers have taken a lead role in the development of these forms, but realtors, lenders and closing agents need to be prepared for some major changes in how they conduct business.
Realtor implications
Realtors need to explain the new rules and potential effects to their sellers and buyers so they know what to expect and how to prepare for, and avoid, potential delays which may result. These delays may prove costly to all parties, including the realtor who may end up waiting for an expected commission a bit longer as the result of a last minute change at the closing table. Buyers and sellers will not just be inconvenienced by delays, they may suffer financial losses as well. The new Closing Disclosure's 3 day rule may wreak havoc on an already fragile industry. We all need to be prepared.
Closing agent implications
One major change is in the relationship between lenders and their closing agents. The closing agent is the party in the transaction that brings it all together. The agent coordinates between buyer, seller, realtor and lender to gather what is needed to affect the closing. This includes such things as, realtor commissions, pay offs of existing liens, adjustments between seller and buyer, tax information, title searches and insurance and the costs for title services. Under the new rules, the Lender is now the entity required to provide all this information, along with their own fees and costs, to the buyer and seller in the form of the new Closing Disclosure. Remember, the Lender must provide their borrower with the final accurate Closing Disclosure no later than 3 specific business days prior to consummation. That being the day on which the consumer becomes legally obligated under the terms of the new mortgage loan. So how does a Lender ensure this gets done? They'll need some help.
With the new timetable, although closing agents may still be required by many lenders to gather and provide this information, the agents will have less time and more pressure to do so. Any delay or inaccuracy may cause a lender to delay the issuance of their Closing Disclosure, which could result in a delay of the scheduled settlement. Any delay in a scheduled settlement is not good. Too many moving parts. In many cases, the seller is buying a new home and needs the proceeds of their sale to complete the new purchase. Think of the domino effect one delayed closing could have on subsequent pending settlements. What about a buyer having already sold and settled on their current home? Where do they go? What about the ubiquitous moving van? What about the kids?
Conducting the closing
Once all information is obtained and the Closing Disclosure issued, the closing agent will conduct the closing in accordance with what the lender discloses. In the past, the agent could make changes on the HUD 1 at the settlement table as long as such changes did not affect the loan or lender's fees. Under the new rules, the loan must close as reflected by the lender's Closing Disclosure. The closing agent cannot make changes at the table without the lender's consent. Any adjustments must be made in concert with the lender with a new revised Closing Disclosure provided at the table. However if such changes have an effect on the final APR or certain terms or conditions of the loan, there may be a need for a new 3 day waiting period. Let the screaming begin...
These delays may not be as prevalent in the states where a loan may close in escrow. In such states the closing (escrow) agent would still gather and provide the lender with all required data, fees and costs, but the loan is not usually consummated at the closing table. Accordingly, the lender and agent may coordinate the issuance of the final Closing Disclosure to allow time for review and adjustments prior to the consumer becoming legally obligated under the loan. Might more states move to escrow closings?
The importance of communications
Technically, the closing agent's role has not changed; they close the loan. Under the new rules they are still responsible for providing the seller with final Closing Disclosure but they now must assist the lender in doing so for the buyer. There needs to be timely and improved communication between the lender and their closing agents, as any confusion, misinformation or delays may cost everyone time and money. To say nothing of an unhappy customer. The death knell for any business.
Closing agents must develop a direct line of communication with each lender for which they close loans. This could be many. Some lenders may have sophisticated systems for the transfer of information, others may not. The closing agent must be prepared to service them all.
How will the need for changes at the table be communicated?
Will the agent have direct access to the lender's systems?
Will the lender have a dedicated person and direct line for contact when a need arises?
What about closings taking place after hours or on weekends?
Will lenders authorize the agent to make changes?
Who in the end will be accountable for errors?
The law says the lender, but will the lenders choose to move that blame to the closing agent?
The rules have changed...
The law is aimed at protecting the consumer, not the realtor, lender or closing agent. It's up to each party to determine what is needed to comply with the law and have in place the technology, systems people and processes to do what needs to be done, correctly and on time. At least for now they'll each have the opportunity to show a "good faith effort" toward this compliance. Then again, who will decide what that might be?
As the Boy Scout motto says, "Be prepared." Are you? You got a little more time; use it wisely.
— Mike Vitali - SVP/Chief Compliance Officer
Mike Vitali is SVP/Chief Compliance Officer for LoanLogics. He has over 40 years of experience in all facets of mortgage lending. Just prior to coming to LoanLogics, he served for more than 12 years as an EVP and Chief Risk Officer for a major national lender. He also served as legislative chair for both the MBA of Greater Philadelphia and MBA of Pennsylvania, and is a member of several task forces dealing with compliance issues for the National MBA.
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This material is provided as a general information service by LoanLogics, Inc. and its applicable subsidiaries and affiliates ("LoanLogics"), and is not intended to provide financial, regulatory or legal advice on any specific matter. The information contained herein reflects the views of LoanLogics and sources reasonably believed by LoanLogics to be reliable as of the date of this publication. LoanLogics does not make any representation or warranty regarding the accuracy of the information contained in this material, and there is no guarantee that any projection, forecast or opinion in this material will be realized. Any links provided from outside sources are subject to expiration or change. © 2015 LoanLogics, Inc. All Rights Reserved.
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