Specializing in real estate market research
The process of buying a home used to be governed by two separate federal regulations. The Truth in Lending Act (TILA) dealt with disclosures about the cost of borrowing. The Real Estate Settlement and Procedures Act (RESPA) determined the legal procedures and disclosure timelines associated with the actual process of getting from signing a contract between a buyer and seller and the closing meeting. In November 2013, however, the Consumer Financial Protection Bureau (CFPB) announced regulatory changes that would merge both of these prior legislations into one rule known as the TILA-RESPA Integrated Disclosure (TRID). Also known as the “Know Before You Owe” regulation, TRID went into effect on October 3, 2015. The CFPB wanted the new regulation to increase the availability of consumer information and streamline some of the real estate closing procedures.
The Closing Disclosure Form
One of the major benefits of the “Know Before You Owe” rule is that more borrowers are actually reviewing their closing documents before they get to the actual closing. Prior to the change, the HUD-1 closing forms were supposed to be done and available for borrowers to review at least 24 hours before the real estate closing. According to the rule, however, a borrower had to request to view the form. Otherwise, lenders assumed that the borrower waived the right to view the closing forms ahead of time. Many times borrowers did not know to request the closing forms, and lenders did not complete the forms until the day of closing.
According to the Know Before You Owe rule, however, lenders must provide the new Closing Disclosure form to borrowers at least three business days prior to the closing. Recent studies show that in the six months since the implementation of TRID, more buyers are taking the time to look over their closing forms prior to arriving at the closing meeting. Prior to the implementation of TRID, only about 74% of home buyers reviewed their closing documents at all. Now, around 92% of borrowers report that they are reviewing their closing documents prior to the real estate closing. This is a huge benefit to buyers who have the opportunity to closely review the breakdown of each closing expense before walking into the stressful closing meeting.
Delays and Disclosures
Lenders rather than title agents now prepare the closing documents and the Closing Disclosure form. The new form and process have caused some problems as everyone involved in the closing adjusts to the many procedural changes. Unaccustomed to the job of completing the Closing Disclosure form, lenders made mistakes completing the form that delayed closing. When the lender makes an update or correction to the Closing Disclosure form within three business days of closing, the whole timeline for closing must be reset. TRID requires that the borrower receive the entire three business days before closing to review the finalized closing documents. In addition, real estate agents report that new consent requirements hinder their ability to access and review the closing documents for their clients. Although the average time to close on a home purchase increased to around 50 days immediately after “Know Before You Owe” was implemented last year, delays created by the regulation are improving.