How Murphy’s Law Just Took Over the Loan Process
As nerve racking as the loan process was before October 3, 2015, we now have TRID-“The Reason I Drink”.
“The new TILA-RESPA Integrated Disclosure (TRID) went into effect on Oct. 3, 2015. It’s two months later, and real estate professionals, as well as many buyers, have given the acronym a new meaning: TRID stands for “The Reason I Drink.” (Bernice Ross, December 14, 2015, Inman.com)
TRID has changed the closing process. Before October 3rd, in Utah, the title company worked closely with the lender and prepared the HUD-1 or Closing Statement. Since TRID went into effect, the lender (vs the title company) must prepare a “Closing Disclosure Statement”, or “CD”. Because of the flow of debits and credits throughout the transaction, it’s possible for the buyer to receive multiple CDs. Each time the title officer receives new numbers, like taxes, HOA dues or a credit for repairs, a new CD must be generated. The kicker is that the CD must be issued no later than 3 days before the closing date and acknowledged (usually by electronic signature) by the buyer. If the buyer is electronically challenged, then the clock is set to seven days before closing. If the CD is not issued on time, the buyer will not meet their contractual Settlement Deadline.
What could possibly go wrong? Just ask Murphy. Here are some examples that happened to my clients and I last week:
- The lender and the mortgage broker work on different systems and have trouble coordinating the data entry for the CD. The CD isn’t issued on time and the closing is delayed.
- There are errors on the CD which must be corrected, which restarts the 3-day waiting period all over again. The closing is delayed.
- The seller didn’t get that window repaired in time for closing and wants to issue a credit for the cost of the repair to the buyer. That means a new CD, which restarts the 3-day waiting period. The closing is delayed.
It’s not fun when you are representing a buyer whose earnest money is already non-refundable and you have to ask the seller for an extension to the Settlement Deadline. Luckily, for my clients and me, their sellers were reasonable and we ultimately closed.
What can we do to prevent Murphy from ruining our transactions and placing buyers in jeopardy?
- Work with a local lender who does not broker out loans, but actually funds them. I recently had an excellent experience with Wells Fargo.
- When writing Real Estate Purchase Contracts, add a buffer of 2-weeks after the Financing & Appraisal Deadline (loan approval) and the Settlement Deadline (closing) to give the lender plenty of time to prepare the CD and ensure it’s correct.
- Do not make changes to the Real Estate Purchase Contract after the Financing & Appraisal Deadline. This is difficult as things sometimes come up at the last minute. As Buyer’s Agents, we need to be on top of our game and ensure that there are no last minute surprises with repairs, taxes or HOA dues.
REALTORS need to educate both buyers and sellers about the new TRID regulations and how they can potentially impact our transactions. It is imperative that a real estate professional is involved in transactions involving financing, as there are a lot of things that can potentially go wrong. Hopefully, we are just going through a learning curve or adjustment phase. In the meantime, TRID, which was intended to protect borrowers, has put them at a disadvantage if they are competing for a property against a cash buyer.
Have you had any experience with a TRID closing? How did it go? Please write in the comments below.