Real Estate Closing-#1

New rules governing the residential mortgage process are in effect.

The purpose of the new TRID, or TILA-RESPA Integrated Disclosure rule, is to simplify and consolidate the required loan disclosures to make loan estimate and loan closing papers easier for consumers to understand. (TILA stands for Truth in Lending Act; RESPA stands for Real Estate Settlement Procedures Act; TRID integrates the two).

It will also change the timing of activities within the process to allow buyers more time to review and digest the various complex documents.

The first noticeable difference in the loan process is a change in the loan estimate disclosure forms, which are provided when someone applies for a home mortgage. The form will be shorter and, in simpler terms, will better explain the mortgage loan’s key features, costs and risks to give buyers all the necessary information at the earliest possible point in the process.

Lenders cannot charge a fee for providing an estimate (except for a reasonable amount for obtaining a credit report) until buyers have received the loan estimate and confirm they want to move forward with an official loan application. This is meant to protect buyers and encourage them to shop for and understand interest rates.

Another change in the borrowing process for homebuyers is the closing disclosure form, which will now provide a more detailed account of the entire real estate transaction. This will give buyers a clear understanding of the loan terms, fees and closing costs so they may confirm they are receiving the loan they agreed to well in advance of the closing date to ensure a smoother closing on their new home.

Because lenders will be required to provide further detail in the closing disclosure forms, most will require all other players in the real estate transaction to submit the information earlier, 10 days to two weeks prior to closing.

This includes the title company’s fees for escrow and title services, title insurance premium, recording fees, mortgage pay-offs and homeowners association dues. Realtors representing the sellers and the buyers must also submit all of their fees, including repairs, contract adjustments and home warranty.

To adjust to the new timeline, Bonita Springs Realtor Jim Barbour is planning for 45-day real estate purchase contracts when a mortgage is being used, rather than the typical 30-day contract-to-closing time period.

As this transition takes place, Realtors will play the crucial role in preparing buyers and sellers for the new process and creating reasonable expectations in terms of timing and coordination. Because accuracy and delivery of the new forms by the lender are critical to ensure the mortgage process is not delayed, Realtors will play a bigger part in communication, cooperation and coordination to ensure a smooth closing process.