Carol Carnevale • DRE# 00946687 • 650.465.5958
Nicole Aron • DRE# 00952657 • 650.740.7954
TILA-RESPA, in spite of its catchy name, is not the lastest dance craze but it is revolutionizing the lending industry, requiring a lot of fancy foot work to comply! It represents a significant change in how real estate financing is handled and all homeowners and principals in real estate transactions with financing need to be aware of its requirement.
Known as TRID, the new regulation integrates four significant lender disclosures required under the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The industry is referring to the change as TRID, Truth-in-Lending/Real Estate Settlement Procedures act/Integrated/Disclosure. Under the new regulation, the Good Faith Estimate (GFE) and the initial Truth-in-Lending Disclosure are combined into a new form known as the Loan Estimate. The HUD-1 and the final Truth-in-Lending Disclosure are consolidated into another new form, the Closing Disclosure.
The objective of the law is to inform borrowers of the true costs of borrowing and related fees and charges. There are specific time requirements for delivering the new forms to borrowers. One of the significant changes is the timing of the delivery of the Closing Disclosure which must be received in person by the borrower three days in advance of “consummation” of the loan which is believed to be the date that documents are executed. If the disclosure is delivered by mail or electronically the new rules require that the borrower be given an additional 3 days – oh, and Sundays and holidays do not count as “days”!
Some last minute changes to the contract or loan program could require reissuance of the Closing Disclosure, potentially creating further delays. For instance, a new 3-day review will be required if a borrower changes loan programs from a fixed rate loan to an adjustable rate loan, or if the Annual Percentage Rate (APR) increases by more than 1/8th percent for fixed-rate loans or 1/4th percent for adjustable loans.
The TILA-RESPA rule is 1,888 pages long and needless to say is very complex. Lenders and title companies have been modifying their systems and training their personnel in order to comply on October 1, 2015, the implementation date.
As Realtors we are expecting that escrows with financing will require more time. It will be important for principals – both Buyers and Sellers – to understand that changes made during the transaction might potentially affect the close of escrow – and of course, it will be in everyone’s best interest to work together to navigate all the new requirements.
(Background Information from David Breaux, Private Mortgage Advisors)