Keep calm and read on: TRID

By now you should be aware of certain changes to the Regulations issued by the Consumer Financial Protection Bureau (CFPB) known as TRID, the TILA-RESPA Integrated Disclosure Rule.

TRID will enact substantial changes to the method in which the cost of credit, and particularly mortgages, is disclosed to consumers. These changes carry with them the potential for stiff penalties from the CFPB for non-compliance, which has many practitioners in the real estate industry in a slight panic. Please keep calm, and keep reading.

On Wednesday, CFPB Director Richard Cordray, in a letter to Congress, indicated that the CFPB would be “sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time.” This does not mean that the new rule will not go into effect on August 1*, nor does it mean that lenders will not have to comply with the new rule on August 1*; what it means is that if the lender has made good-faith efforts (and the CFPB does not say what “good faith” means) to comply with the rule, then the CFPB may acknowledge the efforts made towards compliance when doling out punishment.

Brett Woodburn, PAR’s legal counsel, said, “I believe if a lender, title company or real estate broker has been working hard to comply with the new TRID obligations by August 1 and for some reason falls short, the CFPB will take its efforts into account when evaluating the consequences to an alleged violation. On the other hand, if the CFPB does not believe the lender, title company or real estate broker has been working hard enough to meet the August 1 deadline, then all bets are off.”

Realtors® can prepare for these changes by educating themselves on the new rule and by becoming familiar with the new disclosures that will be issued by the lenders. The impact of TRID will affect the structure and timing of traditional financed home purchases in a number of ways.

First, the timelines will be different in that the transaction may take longer to complete due to the increased responsibilities of the lender. It will be up to you to educate your clients and manage expectations when it comes to how quickly one may be able to go from acceptance of the offer to settlement. Your clients should also be advised that last-minute negotiations should be avoided if settlement is to proceed as scheduled; changes to the terms of the Agreement can result in changes to the terms of the loan which may delay settlement in certain cases.

Second, as the Realtor®, you might be less involved in communicating directly with the lender on your client’s behalf. However, it is as essential as ever for your clients to maintain communication with you regarding information received from the lender. You should be aware of what disclosures your client should receive from the lender and when they should get them so that the transaction proceeds smoothly.

However, this does not mean that communication with the lender is unnecessary. For some, the new rule is going to mean that communications with the lender will be given more priority than they were given before. With disclosures having to be made under a strict timeline, it will be more important than ever for Realtors® to be expedient in returning phone calls and emails, scheduling inspections, and quickly handling all of the details of the transaction. It has been recommended that Realtors® have every step finalized approximately seven to 10 days prior to the settlement date to avoid last-minute delays.

PAR is gathering resources to guide you through the rule implementation. A special TRID webpage has been dedicated to provide you with a one-stop reference point when it comes to TRID. Also, a series of articles following this one will be published on PARJustListed.com in the coming weeks as we get closer to August 1. Please keep calm and stay tuned for further information.

*The Consumer Financial Protection Bureau (CFPB) has delayed the rule’s effective date to Oct. 3, 2015.