Those in the lending industry heaved a sigh of relief when the Consumer Financial Protection Bureau announced that TRID implementation would be put off by a couple of months. Lenders, who had been trying to digest what the changes would look like in their organizations, were preparing for change in August. With the quick ramp up, many lenders were already ready to meet the guidelines.
The new rules were put into place to consolidate previous disclosure requirements. Mortgage applications submitted on or after August 1st would have fallen under the umbrella of these new regulations, if the deadline had not just been extended. Although it’s not entirely clear what this means across the board, the requirements had been broadly interpreted to cover any purchase agreements that were signed or bound after August 1. That deadline has now been pushed to October 1.
Besides the obvious additional time to figure out how to implement these requirements effectively, there are benefits for consumers, too. For those who were already planning on complying with the disclosure requirements, they get a few more months to test out the process and determine how to fix any bugs.
Additionally, the first closings to fall under this regulated process will likely be closing around November and December now instead of September and October. Since the end of the year tends to be a slow period anyways, lenders and title companies have a little bit less pressure to try to and comply with the regulations without the added burden of managing so many transactions.
The new requirements include two documents that are intended to replace multiple documents used in the past. The first document is known as a Loan Estimate, and it serves to replace the Good Faith Estimate. The new Closing Disclosure is intended to replace the HUD-1 sheet for settlement.
Since the forms are not being used across the industry yet, it’s not completely clear if they are any easier for consumers to read and comprehend. The benefit of the regulations for consumers is that theoretically they have more time to review these materials and understand the complete cost of their mortgage. Since the Loan Estimate has to be provided three days after someone applies for a loan and the Closing Disclosure three days prior to closing, ideally consumers will be able to understand and ask questions about the terms without feeling like they are unclear about what they are getting.
Mortgage lenders had already developed streamlined systems for providing all previously-required documents, so the sudden changes and limited time for adopting new systems generated a bit of panic for those in the lending arena. Lenders of all sizes and shapes are trying to find the most effective way to comply with the new requirements. If you haven’t yet finalized a plan for these new procedures, consider the extra time as a trial run to get your systems in place for an October 1 roll-out date.