LOS GATOS (AP) — Members of the real estate industry are getting ready for a new regulation scheduled to take effect this summer that requires changes to the traditional mortgage loan acquisition process. The upcoming TILA-RESPA Integrated Disclosure rule takes effect Aug. 1 and, if not understood by all parties involved, could delay the closing of escrow. Issued by the Consumer Financial Protection Bureau, TRID combines the mortgage disclosure established by the Truth-in-Lending Act and the Real Estate Settlement Procedures Act into one single rule. However, according to a lender panel at a Silicon Valley Association of Realtors meeting, the move to uncomplicate the process has actually created some confusion and is sure to delay the closing of escrow if the new rule is not studied carefully.
TRID seeks to streamline use and language of both forms by integrating the Good Faith Estimate and initial TILA disclosure into one form, known as the loan estimate. This form must be delivered three days after receiving a consumer’s application.
The new rule also combines the HUD-1 and final TILA disclosure into another form, known as the closing disclosure. This form must be provided to consumers at least three business days before the consummation of the loan.
John Woodfin, senior loan officer with EverBank and an affiliate member of the local Realtor association, warned what can trip up many people is the definition of “days.” There are business days, calendar days and federal holidays. There is also the mail time to consider.
“If the forms are mailed, a three-day mail time would need to be added to the three-day rule,” explained Woodfin.
According to the CFPB illustration of the process and timing of disclosures for a sample real estate purchase transaction, for purposes of providing the loan estimate or any revised loan estimate, a business day is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions. For all other purposes, business day means all calendar days except Sundays and legal public holidays.
Nancy Simon, a loan officer with Princeton Capital, said certain transactions are exempted from the TILA-RESPA rule. These exemptions are HELOCS (home equity line of credits), reverse mortgages, Chattel Dwelling Loans (mobile homes or dwellings not attached to property), a person or entity that makes five or fewer mortgages per year, cash deals and partial exemptions associated with housing assistance loans for low and moderate income consumers.
The CFPB website at cfpb.gov contains compliance guides, integrated disclosure forms and samples, and a series of webinars to address implementation. The bureau also will field industry comments and questions emailed to CFPB_MortgageRulesImplementation@cfpb.gov .
Both Simon and Woodfin warned Realtors of other things that could delay the closing of escrow. They include the lack of communication between buyer, agent and loan officer; incomplete documents; a missing signature or date on a page; changes to the contract that are not initialed; large money transfers between accounts; opening new credit cards; and making large purchases or other loan transactions.