On October 3, 2015, the Consumer Financial Protection Bureau (CFPB) implemented the TILA-RESPA Disclosure Rule (TRID). The new rule combined mortgage disclosures that were previously in the Truth in Lending Act with the Real Estate Settlement Procedures Act. The goal of these changes is to increase transparency for the consumer and ensure no surprise charges at the closing table. But before implementation, many in the mortgage and larger residential real estate community worried about adverse impacts of the new regulations. So far, with almost two months of TRID under our belts, the sky does not appear to be falling as many had feared.
After the Great Recession of the late 2000s, there was a clamor for increased transparency for those wanting to purchase a home. Many times consumers would reach the closing table and find surprise fees or costs they didn’t expect or fully understand. The new TRID rules, which were brought into law with the 2010 Dodd-Frank financial reforms, aim to combat this problem and present a full mortgage picture to consumers.
Under the new TRID regulations, the responsibility for providing closing documents directly to the consumer now falls on the mortgage lender. The regulation also requires the distribution of a total interest paid (TIP) sheet. The TIP expresses the total amount of interest that will be paid over the life of the loan. With these documents, the consumer will get the full picture of their mortgage and there will be no surprise fees when the consumer reaches the closing table.
As lenders (and the entire residential real estate industry) prepared for the implementation of TRID, there was palpable concern regarding the system changes needed to comply with these new rules. The new three day waiting period for consumers to review documents before arriving at the closing table opened the door to delays in closing, or a new waiting period if documents were changed. Many lenders feared a cascading delay of closings that could cripple the market. So far, we have not seen that happen.
Much of the mortgage industry prepared for these changes months before they began. The industry has been educating real estate partners on the change, and working with customers to make sure they are prepared for the new documents. So far, we have not seen any problems during this process. The implementation of TRID in some ways has made us manage things even more efficiently because we know the customer has to receive their closing documents three days before their planned closing date. It has established a clear mandate of time for us to work toward and is helping us plan more accordingly.
As we head into 2016, we expect the initial worry about TRID to wear off and for it to become a part of normal business. We recommend that others in the industry be continually talking to real estate partners during all stages of the transaction so there is a clear timeline of events, and no last minute hiccups at closing. Just like with any rule change we as an industry encounter, it all goes back to client education. The more the residential real estate industry can work together to educate our clients on the home buying and selling process, the better off our clients and the industry will be.
Leslie Girard is the branch manager and senior loan officer of Evergreen Home Loans in Vancouver. Evergreen Home Loans is a full-service direct lender with regional offices throughout the Western United States. For more information about Evergreen, visit www.evergreenhomeloans.com.
