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Will New Rules Slow My Closing?
We know that new lending rules began a few months ago. Will this delay our ability to get a mortgage or slow down a home sale?
There have been a lot of claims that the latest mortgage rules will slow the lending process but it’s not entirely clear that they will. More importantly, it’s not clear that many people will be impacted even if loan closings are delayed.
Back when Gerald Ford was president, Congress passed the Real Estate Settlement Procedures Act or RESPA of 1974. Until RESPA, there were no standard closing documents. The result was that borrowers could face a variety of surprise charges at settlement.
With RESPA we got the standard HUD-1 form of itemized services and fees and borrowers obtained the right to see their closing papers 24 hours before closing – but only if they asked.
In 2015, the government established the “Know Before You Owe” program, or what is formally called the “TILA RESPA Integrated Disclosure” plan (TRID). Now, there are several new disclosure statements that a buyer must receive, with set time periods for receipt and consideration, before a loan can close:
• The Loan Estimate is a 3-page document a lender must send to the homebuyer within three business days after they apply for a loan. It includes the estimated interest rate, monthly payment and total closing costs for the loan, and more information to help borrowers understand the cost and terms.
• The Closing Disclosure sent to the borrower at least three business days before closing so a borrower has time to review it and resolve any discrepancies from the terms they expected.
• Certain changes in the originally disclosed terms can trigger an additional 3-day review period: an increase in annual percentage rate (APR) of more than a certain amount; the addition of a loan prepayment penalty; and basic loan product changes, such as a switch from fixed rate to adjustable interest rate.
Only big changes made to your loan will reset the clock.And many lenders are dealing well with the new requirements.
It took 49 days to close mortgages settled in November versus 48 days for loans that closed in July, according to mortgage processor Ellie Mae.
Longer closings may actually benefit sellers. Who doesn’t need more time to find a replacement residence and then pack and move?
In the same way that it took lenders time to get comfortable with the new rules under RESPA, it will also take time with the Know Before You Owe program. To help out, the introduction of the TRID rules was pushed back from August to October and enforcement of the rules has been delayed so lenders can get the bugs out of their software and systems without penalty.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to email@example.com.View Foreclosure Article Archives
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