NEW WORLD OF LENDING

By Jaclyn Palazzolo, Esquire

October 3rd, 2015, rolled out the Consumer Financial Protection Bureau’s newest set of regulations for lender’s issuing residential mortgages.

Lenders, title companies, and relators alike have been preparing for months for the TILA-RESPA Integrated Disclosure (TRID) Rule, also known as the Know Before You Owe regulation.  Below is a brief synopsis of the changes that have been put into place as well as issues that out sister company Sapphire Title & Escrow has seen, or is expected to see with the new rules.

 

Who does the new rule apply too?

  • Most closed-end consumer credit transactions with the exemptions of HELOCs, reverse mortgages or mortgages secured by a mobile home or a sale for land.
  • Only to those borrowers whose application for a loan was received on or after October 3, 2015.
  • There is a partial exemption for certain transactions associated with housing assistance loan programs for low and moderate income consumers.

This includes:

  • Construction-only loans
  • Loans secured by vacant land or by 25 or more acres
  • Credit extended to certain trusts for tax or estate planning purposes.

What is the rule?

  • The TILA-RESPA rule consolidates what use to be four disclosures that were required by TILA and RESPA into two new forms.
  • The first form is a Loan Estimate that must be delivered or mailed no later than three business days after receiving the borrower’s application.
  • The second form is a Closing Disclosure form that must be provided to the borrower at least three business days before the closing takes place.

 

What does this mean from a title company’s perspective?

  • Title companies have been preparing for over a year working with their realtors and lenders for this change. The closing forms being used on an everyday basis have now changed as has the closing process.
  • There will likely no longer be last minute drafting of closing documents as the closing disclosure forms must be delivered to the borrower at least three days before closing.
  • There will likely be less adjustments to the settlement statements and forms day of closing.
  • There may be delays at first in closing while timeframes are adjusted and glitches in software are worked out.

 

What Issues has Sapphire Title & Escrow experienced in the few weeks since the roll out?

  • Nationwide, in anticipation of the new rule and closing delays, there was a drastic increase in the number of loan applications/lender financed contracts received in September 2015.[1]
  • Many realtors were provided seminars and advice by their title companies about possible delays in closing that may occur as the new system is tested. This information was passed along to their buyers which led to an increase in applications being submitted early.
  • Likewise, October has shown a sharp decrease in the number of loan applications, and lender contracts being received. The Mortgage Bankers Association has estimated that mortgage applications dropped 27.6% for the week ending October 9, 2015.[2]
  • The CFPB has repeatedly stated that there will not be an increase in the amount of time to close. However, with so many unknown variables and untested software in place, we at Sapphire Title & Escrow Company have instructed our realtors to aim for 60 day contract closing date on all lender deals during the first few months after implementation.
  • Finally, Sapphire Title & Escrow has been monitoring H.R. 3192 more commonly known as the Homebuyers Assistance Act, which was passed by the House of Representatives in early October. The Act would enact a formal grace period through February1, 2016, for good faith efforts to comply with the TRID regulations.

With the rule officially in effect we would like to know how this has affected your lending processes.  Please let us know whether you have seen delays in closing, system/technical issues, or push back from borrowers.  As always we are here to help you in any way possibly.

 

Source information and for more information and common questions visit: http://files.consumerfinance.gov/f/201508_cfpb_tila-respa-integrated-disclosure-rule.pdf

[1] Mortgage Bankers Association October 14, 2015 article Mortgage Application Decrease in Latest MBA Weekly Survey

[2] Mortgage Bankers Association October 14, 2015 article Mortgage Application Decrease in Latest MBA Weekly Survey