When the housing market collapsed in 2007, it was understandably necessary for the federal government to react by making a point to keep a tighter leash upon the financial industry. Therefore, in response to the mortgage crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2011, which created a new government agency—the Consumer Financial Protection Bureau (CFPB).
TRID
In an effort to avoid another housing disaster, the CFPB settled upon a set of stricter mortgage rules and regulations that recently went into effect on the 3rd of October. Known as “TRID,” (which stands for: Truth-in-Lending Act (TILA) + Real Estate Settlement Procedures Act (RESPA) + Integrated + Disclosure) the goal was to:
- Overhaul and improve the abundance of archaic industry forms, which date back to the late sixties and mid-seventies, and
- To slow down the mortgage process in an effort to give the borrower more time to review their forms.
In short, these new rules are expressly geared towards improving the home-buying experience for consumers; however, it’s important to note that the overall mortgage process is going to be a lot longer and more challenging than it was in the past.
THE PROCESS
For starters, once the borrower completes the loan application and gives the sales contract to their lender, the lender must then return a loan estimate to the borrower within three business days; however, before the lender can take any steps to either require loan documentation, order a title search, or mandate an appraisal, the borrower must respond to the lender with “their intent to proceed.” In other words, to keep things moving in a forward direction, it is imperative that the borrower respond to the lender as quickly as possible after receiving a loan estimate.
With that being said, once the seller has accepted the buyer’s offer and the closing process begins, it’s important to realize that the new regulations also slow down the end of the mortgage proceedings as well. Basically, the loan cannot close until the lender has:
- Sent the borrower the final Closing Disclosure (CD)
- Confirmed that the borrower has received the CD
- Waited for the three-day waiting period to pass
STEPS FOR BUYERS
Therefore, if you’re a buyer, you may want to consider the following steps, which will help you complete the entire process with as little fuss as possible.
- Submit a pre-approval application before making an offer in order to minimize the processing delays that will occur if you don’t already have a loan lined up
- Don’t drag your feet. Make a point to give the sales contract to the lender as soon as it’s available
- Consider doing things electronically, such as signing the loan disclosures
- Provide the lender with your “Intent to Proceed” as soon as your able
- Make sure you have all of your loan docs ready for delivery to the lender within the first week of the process
- Confirm receipt of the CD immediately after receiving it so you can get the ball rolling on the three-day waiting period
CONCLUSION
In the end, while these new laws make things a bit more complicated—especially if you’re operating under a time crunch—their purpose is to give buyers the necessary time to make sure they’re closing on a deal that truly fits into their life. No one wants to see another foreclosure crisis, so these types of laws will hopefully go a long way towards making sure buyers are absolutely sure before they sign on the final dotted line.
If you have any questions or you’re a seller and would like to know more about how these new regulations will impact your sale, please feel free to contact me.
Marie Dinsmore | The Dinsmore Team | www.DinsmoreTeam.com | 770-712-7789
