New TRID Mortgage Rules Causing Delays

February 3rd, 2016

In a December 15 2015 Wall Street Journal article titled New Federal Rules for Mortgage Forms Blamed for Delaying Loans  stated, “Mortgages took an average of 49 days to close in November 2015”. It went on to say, “Behind the scenes, some lenders describe disarray as various parties in real-estate transactions carry different interpretations of the same rules. The changes, implemented by the Consumer Financial Protection Bureau in October, replace the forms borrowers receive when they make an application and before they close on a mortgage. The rules also require lenders to give borrowers final terms of a loan at least three business days before closing to ensure they have time to understand the agreement. Lenders say that both changes resulted in large technical and training challenges.”

I hear some parties to the transaction who are not the ones processing the loans, like realtors and title companies, cavalierly state that lenders should not be slowed down by these new rules. But realtors and title companies don’t do the loans, lenders do, so lenders are the only ones who have intimate knowledge of how the process works and how it has been slowed down by these new guideline. Realtors will cherry pick one lender who closed one loan in 27 days and will then assume that can be done every time that fast. It cannot! You can’t scale up that fast of a timeline across hundreds of loans system wide.

An article in National Mortgage News on December 22, 2015 titled “Existing Home Sales Plunge on TRID Issues”, said “Existing-home sales plummeted in November confirming fears in the mortgage industry that a new consumer disclosure rule is delaying mortgage closings.”

In the same article Lawrence Yun who is the National Association of Realtors chief economist said he, “attributed the stark drop-off in demand, in part, to the Consumer Financial Protection Bureau’s disclosure rules, known as Know Before You Owe or TRID, for Truth-in-Lending Act and Real Estate Settlement Procedures Act integrated disclosures.”

The bottom line is that mortgage transactions are taking longer and it is imperative that consumers ask their lender before they write a contract what amount of time the lender needs to get an appraisal, loan approval, and then to get to settlement.

It won’t be possible, not without a delay, to do a last minute walk-through and see that the seller did not do something that they were supposed to and then get a seller credit at settlement to make up for the omission. Now realtors and homebuyers will need to do walkthroughs 7-10 days in advance, or do them at the last minute but be aware that trying to extract a credit from the seller may delay settlement.

The real estate industry simply needs to realize the new norm is not to expect to rush things through any more and not to make last minute changes.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.​

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