- Most of the big national lenders are going to abide by the "mailbox rule," which results in a three-day delivery period followed by a three-day waiting period.
- Keeping both agents in the loop with the TRID critical dates will be important from a marketing standpoint. The lenders that do this well will see more business come their way.
- Delivery four to six days prior to consummation and close of escrow would be better and less stressful for all involved.
As a real estate agent, it is important to understand the TRID (TILA-RESPA Integrated Disclosure) rule. And that means checking with your lender. In fact, an interview of sorts is appropriate to determine how prepared the lender is and how they intend to communicate with you throughout the transaction.
This applies to buyer agents and listing agents. Each needs to know how they will be notified that key milestones are being reached.
Here are a few questions your lender should be able to answer.
Make sure to ask the following so that you know what to expect:
1. Are you preparing and delivering the Closing Disclosure?
Nearly every lender will answer “yes” to both parts of the question. Even if they let the settlement provider prepare and deliver the Closing Disclosure, the lender is held responsible for the accuracy and proper delivery. For this reason, lenders will prepare and deliver the Closing Disclosure.
2. Will you allow electronic acknowledgement of receipt of the Closing Disclosure to shorten the three-day delivery period?
This is a tricky question. Most of the big national lenders are going to abide by the “mailbox rule,” which results in a three-day delivery period followed by a three-day waiting period.
The result is a full week required from delivery to the signing of the loan documents. Other lenders, some multi-state and some local, have indicated they will use electronic delivery (email with specific acknowledgement rules) to shorten the delivery period from three days to one or zero days.
Potentially, a lender could electronically deliver the Closing Disclosure on a Monday, and with proper acknowledgement, the borrower could sign on Thursday. This is the shortest period possible from delivery to signing.
3. Will you be engaging and informing the listing agent about delivery and acceptance of the Closing Disclosure?
4. How are you going to inform me about the delivery of the initial Loan Estimate and receipt of the Intent to Proceed from the borrower?
5. How are you going to keep me informed about the progress of the delivery of the Closing Disclosure?
One answer fits all three questions. The proper answer is via email or some Web portal. Communication between the lender and both agents needs to reach a new level.
Keeping both agents in the loop with the critical TRID dates will be important from a marketing standpoint. The lenders that do this well will see more business come their way.
6. What is the goal for delivery of the Closing Disclosure? How many days prior to the close of escrow will you be targeting delivery?
The answer depends on the customs of each state. States that sign and close escrow simultaneously would want the Closing Disclosure delivered with a minimum of three days prior to consummation (signing of the loan documents).
This meets the minimum requirement of the rule. Delivery four to six days prior to consummation and close of escrow would be better and less stressful for all involved.
In states where close of escrow (recordation of documents) occurs after consummation, the number of days prior to the close of escrow increases.
Leaving a couple of days post-consummation for processing of loan documents, funding of the loan and wiring of funds, the Closing Disclosure should be delivered at minimum five days prior to close of escrow — and six to eight days would be ideal.
Obviously, these are goals for timely delivery. Lenders might struggle to meet the three-day requirement early on, and mistakes will certainly happen — so anticipate several versions of documents until they work out the process kinks.
7. Have you connected with title and escrow companies to ensure a smooth flow of data to complete the CD?
The transfer of data between lender and settlement company takes on a new look under TRID. The normal flow of fees, charges and figures toward the settlement provider will no longer work.
Lender and settlement provider will need to share data via a secured “pipeline” for the lender to have all necessary information to prepare the Closing Disclosure.
The smooth flow of data can look different for different lenders. The flow of data can and will change over time as well. There can be manual, portal or integrated systems. This is the biggest challenge for lenders and settlement providers.
The answer to this question should be a definitive “yes, we have discussed systems to handle the TRID requirements.”
8. Can you tell me what sorts of last-minute changes to the contract, and therefore, the Closing Disclosure, could affect APR (annual percentage rate)?
The lender should detail which fees and charges affect APR and which do not. There are a lot of things that can change the APR, including undisclosed charges and major credits (or anything that can ultimately affect the appraisal).
9. If there are two borrowers, must both acknowledge receipt of the Closing Disclosure? If so, does the waiting period start after the last borrower acknowledges receipt?
The lender needs to convey their specific requirements for cases involving multiple borrowers. This is why some lenders are sending the Closing Disclosure via overnight mail and using the mailbox rule.
This way any and all borrowers will have the Closing Disclosure. Still, each lender will have to evaluate delivery to multiple borrowers while complying with the rule.
10. Will you have a point of contact for after-hour issues requiring a revised Closing Disclosure?
Since the settlement provider cannot make last-minute adjustments to the Closing Disclosure, the lender needs a plan in place to make these changes. Each lender will handle this differently, but they should be able to share their plans with the agent.
The questions above are a starting point. You should get a good feel for the preparedness of your lender with these questions. Hopefully, the lender is ready and has a plan of action for transactions.
Remember, each lender might have slightly different policies and procedures to ensure compliance with the new rule. Agents will need to be diligent to stay involved and stay informed.
Bill Risser is vice president of new media and education for Chicago Title Agency in Phoenix. Bill assists real estate professionals by teaching them how to use social and technology tools effectively and efficiently.