With TRID’s (TILA-RESPA Integrated Disclosure Rule) effective date of October 3, 2015 approaching, lenders, real estate agents and settlement agents need to be taking stock of their preparedness and communicating among themselves and with consumers about what to expect. Below is a “Top 5” for TRID Compliance by three individuals from organizations recognized as industry leaders who have been dedicated to implementing TRID on time and in compliance. These thoughts are intended to help ensure preparedness and to provide insights on issues you need to consider prior to the effective date.
The Lender’s Perspective
Joshua Weinberg, SVP Compliance, First Choice Loan Services Inc.
1. Be ready! Prudent lenders have been preparing for these changes for over a year and working closely with business partners to ensure things go smoothly. That includes building backup plans, adding resources and learning investor requirements. Even though we got the grace period, it’s a mistake to slow down efforts to implement. The extra time is needed to test systems and train staff.
2. Use compliance as a competitive advantage. The technology and tools available can help reduce the impact of many of the most challenging obstacles of complying with the Rule.
3. Leverage secure technology. Electronic disclosures and e-signatures can shorten the loan process by almost two work weeks compared to using U.S. mail.
4. Master the 3-day waiting period. The timing requirement related to the Closing Disclosure (CD) levels the playing field among all lenders. Those with well-thought-through procedures that improve the consumer experience have an advantage.
5. Communicate about decisions regarding who will issue and manage the CD. Put processes in place to ensure accuracy and allow you to remain as nimble as possible to accommodate changes quickly.
The REALTOR’S® Perspective
The National Association of REALTORS® (NAR)
1. Add 15 days to your transaction time. If you could normally close in 30 days, make the contract 45. TRID does not sufficiently address the “unexpected;” the stranger the deal, the more potential for issues, so give it more time.
2. Manage CD timing. Borrowers must receive the CD at least three days before closing, and sellers no later than the day of consummation. NAR helped win limited circumstances that trigger waiting periods after a revised CD is issued. Lenders will review, approve and issue every change, because they are fully liable for everything on the CD, so last-minute changes could be problematic. As soon as a change is known, the safest course is to communicate the change to the lender as soon as possible.
3. Educate clients. Real estate professionals should help their clients understand the new timing requirements, such as evidencing an intent to proceed with the loan estimate, and help the client understand that promptly providing information will help make for a smooth transaction.
4. Embrace the deadline. TRID is effective for applications received on or after October 3, 2015. NAR’s fight for a grace period and more guidance helped obtain a longer delay, but everyone must ensure they’re prepared for October 3.
5. Focus on three things between now and October 3. (1) Maintaining regular contact with your business partners; (2) avoiding last-minute changes on your end; and (3) helping your business partners avoid last-minute changes on their end.
The Settlement Agent’s Perspective
Steve Gottheim, Legislative and Regulatory Counsel, American Land Title Association (ALTA)
1. Check title fees. TRID requires the inaccurate disclosure of title insurance premiums in 43 states. This presents two challenges. The title industry must disclose premiums accurately to consumers without confusing them, while lenders must figure out how to explain this issue to consumers without causing them to distrust the transaction. Second, title providers must determine the information lenders will require in order to generate accurate Loan Estimates (LE) and CDs.
2. Be aware of process changes. Today, the HUD-1 is in the settlement agent’s control, allowing them to establish one process for its completion in all transactions. However, the CD is a lender document, so settlement agents may need different processes for different lenders, making it more difficult to build efficiency or consistency into the process.
3. Address the shopping list. One of TRID’s objectives is to promote consumer shopping at both the loan/lender stage and the service provider stage. However, many of the requirements, such as tolerances and the shopping list concept, may create hindrances to shopping. After 2010, many agents wanted to be on the lender’s shopping list, but under TRID, it may be advantageous not to be listed.
4. Set the right expectations. Many common real estate practices will be more difficult or even impossible after October 3. Set the right expectations with consumers, real estate professionals and lenders about critical issues like dates per the sale agreement, and how changes to the deal impact timing or may cause delays because of the three-day rule or process requirements.
5. Data accuracy is paramount. Ultimately, TRID really makes two critical changes. First, it requires new timing for the CD. Second, it requires a higher level of accuracy earlier in the process. Successful settlement agents will ensure lenders trust the data and information they receive from the agent. They should provide lenders an easy way to validate their fee and rate data, as well as confirm they are dealing with the correct company. The ALTA Universal ID, a universal identification number for settlement agents, will become a useful industry utility.
While the mandatory deadline for TRID implementation has been extended, this is not time for vacation! Use the time to train staff and test your systems. It’s not until transactions are tested using real-life scenarios that the issues and challenges you haven’t already considered will reveal themselves.
This column is brought to you by the NAR Real Estate Services program.
For more information, visit www.realtor.org/respa.