I’m sure if you’ve been planning a home purchase you’ve heard the acronym TRID and the abbreviation CFPB. Have you spent time researching what all those letters actually mean or how this alphabet soup could affect your purchase and sanity?
Let’s start here:
1. TRID is the blending of the RESPA disclosure procedure with the Truth in Lending Act. Our real estate closing procedure, as a whole, has been revamped.
2. CFPB stands for the Consumer Financial Protection Bureau. This organization is now in charge of buyer borrowing disclosure and the closing process.
If you’ve purchased a home in the past you may remember your closing was governed by HUD and your closing statement was known as the HUD-1. Well, no longer. HUD does not govern, regulate or oversee closing procedures as of October 3, 2015. That task is now under CFPB jurisdiction and they’ve made some changes.
Grab and pencil and paper…
1. First things first, the HUD-1 or closing/ settlement statement is now known as the closing disclosure. Ok, that’s an easy one. In the past, both you and your trusted Realtor were given a copy of the closing statement prepared by the closing attorney. You probably received that statement the day before or maybe on the way into the attorney’s office! CFPB does not allow your lender or closing attorney to be directly send your closing disclosure now. You, the consumer, will need to forward that CD to your Realtor to help you review for accuracy.
2. CFPB has mandated that your lender will now be preparing the closing disclosure NOT your closing attorney. Your closing attorney will need to gather all pertinent documents, proceed figures, downpayment amount, prepaids, HOA fees etc and submit those to your lender at least 14 days PRIOR to closing. Your lender will then prepare the CD and send out to you, the borrower and to your closing attorney. Don’t forget to send it to your Realtor!
3. Lenders, mortgage companies and closing agencies have been required to spend ALOT of money upgrading their offices, computers, networks, infrastructure to conform to CFPB standards of technology and data encryption. Emails sent to consumer will be encrypted and could prove difficult for those tech challenged.
4. Your Realtor and their brokerage will submit their license numbers, brokerage fee amounts, commission amounts at least 14 days PRIOR to closing.
5. Your lender will now prepare your closing disclosure and submit it to you at least THREE BUSINESS DAYS before your closing date. You have to prove receipt! If there is no proof of receipt, the disclosure clock keeps running until three documented days have passed. That disclosure had better be error free because if it has to be changed and those changes affect your APR, the loan product or prepayment amount, the disclosure must be resubmitted and the THREE day clock (with receipt proof) starts all over again. There are NO exceptions to the three business day rule… you will not be legally allowed to close!
6. Property walkthroughs to ensure repairs were made should occur at least 7 days PRIOR to closing because if there are items not repaired and a monetary settlement is reached, your closing disclosure has been affected which potentially affects your closing disclosure, and you guessed it, starts the THREE BUSINESS DAY clock all over again. This is tricky because what seller moves out at least 7 days prior to closing??? You’ll probably need 2 walkthroughs now.
7. You must have your hazard policy IN PLACE/ EFFECTIVE at least FIVE business days prior to closing so that your lender can add it to the closing disclosure and still meet the 3 business day rule.
8. Instead of line item numbers like we saw on the HUD-1, there will be 7 charge areas to review. These areas cannot be added to, subtracted from or amended. If there are items that don’t fit into these itemized areas, your disclosure will be affected and closing will be delayed until the disclosure can be corrected.
9. Borrowers will be asked to submit increased amounts of financial documentation in shorter timeframes. Being organized and patient is key!
10. Back to back or domino closings will be exceedingly difficult if not impossible during the transition period.
Click HERE to read my takeaways and how the changes will affect your closing and your sanity!
Have questions? Call me Jennifer @ (615) 977-8444 or email whereyoulivetn@gmail.com