Things have changed. The Consumer Financial Protection Bureau has implemented a brand new set of rules called TILA- RESPA Integrated Disclosure. The acronym for the rule is TRID. The TILA part refers to Truth in Lending Act and the RESPA refers to the Real Estate Settlement Procedures Act. All of this was created to protect consumers. Wall Street is slick. Banks are slick. Investors are slick. They have avoided their share of the financial collapse and also avoided jail time for their potential criminal behavior. The only way to slow them down was to make the rules they have to follow cumbersome and more difficult to sneak around.
TRID goes a long way towards that goal. TRID is cursed behind closed doors. Everyone that has to comply is dragging their heels, kicking and screaming about the unfairness of it all towards doing what is necessary to protect the buying public from deceptive behavior and double talk about what is being paid and what is being paid for.
This is a good thing. We have long passed the time when buyers and sellers deserved a plain English, simple explanation of what the hell is happening when settlement occurs. The new documents were designed to do just that and upon first glance they seem to be pretty darn accurate.
Where’s the problem? Well, lender’s have to make sure that the figures they provide the title company and the figures the title company comes up with are exactly the same. Lenders have to provide borrowers with accurate figures regarding the loan amount, the interest rate and other terms. The nice part is that borrowers have to have the information in layman’s terms. The disclosure also has to include a simple, easy to understand “this is your monthly payment”. Wow, what a concept.
Putting all this together has created a conundrum for lenders and title companies. The practice of producing a HUD-1 (financial spread sheet of the money passing hands at settlement) the morning of settlement is not going to work anymore. Everyone has to have a copy several days before closing. If there is a change, everyone has to have the corrected HUD-1 for several days before closing. This fact ends the former practice of selling a home and buying a new home in the same day. This fact has created the need for “short term” post settlement occupancy on the majority of home sales that are occurring. This fact has created the need for pre-settlement walk through s to take place about a week before settlement. This fact has all but ended concessions being made at the table. Nothing can occur that requires a change to the HUD-1 can occur (or you have to go back to the “waiting period” again.
So, those of you selling or buying or doing both, rest assured you will have the facts. You will receive easy to understand documentation regarding the transaction. Your Realtor will be doing their best to make sure you are aware of the necessity of proper timing and the potential need to deal with a short term rent back situation. Your lender and the title company will be sending documents back and forth and back and forth until ONE clear statement (HUD-1) is created.
Things have changed, but isn’t it nice that you now will have the opportunity to understand your bottom line?