- Seemingly, the lenders who are generating the Closing Disclosures (CDs) are struggling with the process as several agents have heard reports of data entry issues.
- Agents can no longer make last-minute changes or repairs under TRID without issuing a new CD and thereby restarting the clock.
- Most lenders will require an inspection of all repairs prior to closing and possibly before issuing a CD.
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.”
Tight credit coupled with low inventory has been the bane of buyers in 2014 and 2015. When TRID went into effect, another layer of regulations transformed the already difficult loan process into something even more complex and confusing for today’s buyers and real estate professionals.
Drunk but not in love
At closing on our home sale, I asked Susan Outon, senior escrow officer of Chicago Title in Austin, what her experience had been with the new regulations from TRID and the Consumer Financial Protection Bureau (CFPB).
One of her buyers summed it up best: meeting the lender’s demands was like repeatedly having blood drawn.
Because of the flow of debits and credits throughout the transaction, most buyers will receive multiple Closing Disclosure (CD) statements.
The first of these, the Loan Estimate, arrives within two weeks after the transaction is opened at the title company. Agents must inform their buyers that this is just the first of the disclosures that they will receive.
Each time the escrow receives a new set of numbers, whether it is from the lender, the homeowners association, taxes or due to a repair, a new CD must be generated.
Moreover, while the lender is required to issue the TRID-mandated CD no later than five days before the closing date, the lenders often tell the escrow officer to issue another updated CD as well.
If there is a discrepancy in the numbers the poor buyer is left wondering exactly who to believe — the escrow/title officer or the lender?
Although many agents are reporting that they have had no issues with TRID, a Raise the Bar Facebook discussion highlighted many serious problems.
Lori Williams of ProStead Realty reported that in three of her past four closings the earnest money was left off, or the HOA data was wrong.
Seemingly, the lenders who are now generating the Closing Disclosures are struggling with the process. Williams, along with Scott Geller, a broker associate with Re/Max in Jamison, Pennsylvania, have both heard reports of data entry issues with the software.
Apparently, the software doesn’t always allow the numbers to be entered the right place on the form. In Geller’s case, the lender in one of his transactions took a $1,000 hit and a fee reduction to obtain the automated approval required to close.
Those who insist on using snail mail rather than digital communication are also contributing to the problems. Milwaukee-based Realtor Pat Gust Tasker experienced a delay when her New York buyers did not close on time.
The New York closing attorney refused to send the documents electronically and insisted on using the mail. That delayed the closing by 10 days.
Bill Thompson, who is both a title officer and a Realtor, shared how stressful coping with the TRID Closing Disclosures has been:
“Each lender I have worked with since Oct. 3, 2015, has a different process in verifying the costs as well as the delivery of the CD (Closing Disclosure).
“Over the past 18 months, we have been trained on this new product without the benefit of working with live examples. Now that lenders and title agents are prepping the CD, it is coming to a head that our software was not ready.
“We use the No. 1 title software in the U.S. and were told to check the website every Thursday for the latest patch. My biggest recommendation is to personally take charge of the deal and to make sure the lender is spoon-fed the commissions, the bill impacting the buyer, tax and anything else that you can think of.
“Be prepared to give the lender your office and personal [real estate] license numbers. The more you give the lender, the less opportunity there will be for delays.”
Advice for agents
Rich Vetstein, founding partner of the Vetstein Law Group, advises agents that you can no longer make last-minute changes or repairs under TRID without issuing a new CD and restarting the time clock.
The CD must be issued to the borrower three days before closing (if sent electronically) or seven days before closing (if sent by mail). A best practice is to submit this to the closing attorney, title or escrow officer no later than 20 days prior to closing. All parties should agree to this date in their purchase and sale agreements.
Vetstein also explained how seller repairs will cause major hassles and potential delays under TRID.
TRID requires that all property repairs must be fully disclosed in the purchase and sales agreement and to the lender. No more outside side agreements or repair agreements are allowed.
“Most lenders will require an inspection of all repairs prior to closing, and some will do the inspection prior to the issuance of the Closing Disclosure. This would also necessitate a much earlier walk-through by the buyer to inspect those repairs.
“If there are problems with the repairs, or the insistence on a holdback, which would be reflected on the Closing Disclosure, this could delay the issuance of the Closing Disclosure, and, therefore, delay the closing.
“Accordingly, the general consensus is that it will be much cleaner under TRID to forego seller repairs and instead have the seller agree to a closing cost credit to the buyer. This will eliminate the lender inspection, additional walkthrough and potential of delays.
“Also, a quick word about holdbacks at closing. We are not sure how lenders will handle holdbacks at the closing, but many of us are of the opinion that lenders will not allow a holdback unless it’s disclosed on the Closing Disclosure.
“So that effectively means no closing table holdback agreements unless you want your closing delayed to re-issue the Closing Disclosure.”
Like all changes in the real estate industry, everyone will ultimately adjust to the new regulations, software kinks will get worked out, and workarounds will be found for thorny problems.
In the meantime, would you like yours straight up or on the rocks?
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/