The age of super-fast mortgage closings may be coming to an end soon, thanks to new regulations set to take effect on October 3. The regulatory changes are a result of the Dodd-Frank Act. They are essentially are designed to give borrowers more time to understand their mortgage documents, which can be both good and bad. By combining existing forms and changing the nature of how the forms are given to borrowers, the forms may extend the closing process to up to 60-days.
The Boston Globe details the consequences of the introduction of the new TRID (TILA-RESPA Integrated Disclosure) forms, also known as the 'Know Before You Owe' documents. One of the biggest changes will be instead of getting documents from different sources throughout the process (title, lender, etc. etc.) borrowers will receive them from their lender to minimize confusion. Additionally, the forms will be spaced out on a very specific schedule. If there are any changes or errors (which can happen often during the process), the process will come to a halt while the borrower approves the changes to those forms. In short, no more on-the-fly changes that have always helped speed up the process. The article warns that those changes will likely push many closings to 60-days instead of 30, and may also make it very difficult for borrowers looking to sell their existing home while purchasing a new one in the same time frame. Completing both transactions without a gap could prove difficult and could leave a borrower at a hotel or a friend's couch for a night or two.
The mortgage industry has been working all year to set up their compliance systems and integrate the forms into their processes. The Consumer Financial Protection Bureau (CFPB), recognizing the challenge facing mortgage bankers and lenders, has delayed the effective date of the new TRID forms twice, but no further delay seems imminent. Borrowers should be aware of the changes and prepared for a potentially longer process starting October 3. Click here for a full breakdown of the 'Know Before You Owe' rules.