Takeaways:
- Are your clients aware of how the TRID regulation affects the closing process?
- If this is not their first rodeo, you will need to explain the new process and consumer disclosure forms and establish expectations.
- Encourage your clients to think through mortgage choices, apply for loan estimates through multiple lenders and indicate intent to proceed; you’ll need to find out who’s responsible for the Closing Disclosure and be the source of accurate information.
So you’ve spent the last 23 months preparing to comply with the Consumer Financial Protection Bureau’s new TILA-RESPA Integrated Disclosures rule, or TRID, which takes effect Oct. 3.
Or you’ve spent at least a few months on it, anyway — for your sake, let’s hope so.
But what about your clients? Are they aware of how the regulation affects the closing process? If they are purchasing their first home, the changes will be new only to you. But if this is not their first rodeo, you will need to explain the new process and consumer disclosure forms and establish expectations for how the mortgage transaction will proceed.
Here are the CFPB’s five recommendations for what to focus on to facilitate the best experience for your clients:
1. Encourage your clients to think through mortgage choices first.
Engaged homebuyers are more likely to select a mortgage loan that meets their needs and presents few surprises during underwriting, the CFPB says. The preapplication time frame is critical, and gives clients a chance to decide on a loan type and down payment amount before they are focused on a closing date.
Agents should make their clients feel comfortable that they can afford the home and receive a mortgage loan approval. They should encourage prospective homebuyers to review their credit reports early in the process so they can find and correct errors to potentially raise their credit score and reduce their cost of borrowing, the CFPB advises.
2. Once a property has been identified, encourage your clients to apply for Loan Estimates from multiple lenders.
Loan Estimates no longer require written documentation, so agents should encourage clients to compare offers from several lenders to avoid second-guessing whether they got the best deal. Loan Estimates show rates and loan terms in an easy-to-compare format, customized based on clients’ credit and the details of their request. Loan Estimates are most useful when your clients define the requested mortgage type and compare “apples-to-apples” Loan Estimates, according to the CFPB.
3. Make sure your clients indicate their intent to proceed.
Clients may request a Loan Estimate and then feel like they’re done — but Loan Estimates expire after 10 business days. If clients do not complete the steps required by the lender to express their intent to proceed, their applications could be closed as incomplete. If this happens, your clients will likely need to start over with a new application.
Lenders will have different policies about what your clients need to do to successfully move an application forward from the Loan Estimate stage into active processing, when the appraisal and other verifications typically begin. Talk to your lender partners to learn about those policies and discuss lender requirements with your clients to be confident that your clients have an active mortgage application underway, the CFPB advises.
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4. Be the source of accurate and timely information about the property and transaction.
Because TRID makes lenders responsible for overseeing compliance from everyone involved in the closing, lenders are now at the center of all transactions. But real estate agents will still play an important part in making sure that clients have all the information they need to experience a smooth closing.
The CFPB advises agents to make sure clients have detailed information they can share with their lender about property taxes, homeowners association (HOA) fees, condominium association fees and the estimated cost for homeowners insurance; communicate any transaction changes to everyone involved and confirm that any revised information has been received; and confirm that the lender and closing agent have the buyer’s and the seller’s broker information so it appears correctly on the Closing Disclosure.
5. Find out who provides the Closing Disclosure.
Who will prepare the Closing Disclosure? Some lenders have already said they will be the only party with access to it. Other lenders may allow title insurance or settlement agents to do it.
When and how your client receives this form will vary from lender to lender and state to state — so communication, early and often, with your partners will be key.
Method of delivery may vary, too. Closing Disclosures may be sent via mail, delivered in person or electronically.
Keep in mind that no matter who prepares or provides the Closing Disclosure, the lender is still accountable for its accuracy and approves the final version, the CFPB says.
For more information and guidance on how to handle mortgage transactions after Oct. 3, visit the CFPB’s resource page.
