New rules will impact residential real estate purchasers who obtain a loan after October 3rd!
The CFBP (Consumer Financial Protection Bureau) instituted new rules to protect consumers and it known as the Know Before You Owe initiative.
The TRID (Truth in Lending Act- Real Estate Settlement and Procedures Act Integrated Disclosure Rule), disclosure rule replaces four disclosure forms with two new ones, The Loan Estimate and the Closing Disclosure. The borrower has up to ten days to review the Loan Estimate before the appraisal can be ordered which means appraisal period will take longer than normal.
The rule also requires that the borrower has three business days to review the Closing Disclosure and ask questions before closing. This is MANDATORY and NON-WAIVABLE period. Any changes in the loan (i.e. increased buyer credits or reduction in purchase price) will trigger an update to the disclosure and add another three-day review period.
How this impacts a transaction: The average length of escrow may increase anywhere from several days to several weeks! Agents and escrow officers must be diligent early in the process to work quickly with the lender and the buyer to try and avoid the mandatory three business day review period on multiple occasions. Unfortunately this extra step makes it even more difficult when those obtaining a loan are going up against all-cash buyers. Lenders and escrow companies will also have to be CFBP certified and follow stricter rules. Inevitably, we are preparing for escrows with a 30 day escrow period to possibly end up being more like 40 to 45 days. Patience and diligence from all involved will be essential while everyone adjusts to the new system.
By John Skinner
