GRCC & TRID – What to Know

GOOSMANN ROSE COLVARD & CRAMER, P.A.
ATTORNEYS AT LAW

TILA-RESPA INTEGRATED DISCLOSURES (TRID)

For Agents and your clients who apply for most residential mortgage loans after October 3, 2015 or represent a seller in a transaction governed by these new lending rules, the following are items that we think that you should know and be prepared for….
HUD-1 IS OUT AND CD IS IN: A new 5-page closing statement called the “Closing Disclosure” or CD will be used in replacement of the HUD-1 Settlement Statement.

  •  Most lenders, not GRCC, will prepare and deliver the CD, and we, instead, will be providing relevant closing items for the CD to the lender.
  •  GRCC, as closing attorney, must get information to the lender approximately 10 to 14 days prior to the closing date for completion of CD to meet the delivery requirement. To this extent, at least 10-14 days prior to planned closing date, Agents and/or the Buyer will need to communicate to us:
    • Any/all contract changes/amendments/etc.
    • ALL BUYER PAID COSTS –whether prepaid or to be paid at closing, including inspection invoices, homeowners insurance premium, survey invoices, etc.
    • Each agent’s individual real estate license number AND the real estate company’s state license number [TIP: Put your license #s into the contract up front; NCAR forms are set up to gather this, so just use it]

CLOSING DATE: The CD must be delivered to the Buyer/borrower at least three (3) business days prior to the scheduled closing date if by email or longer if by mail.

DISCLOSURE OF THE CD:

  • Agents will not likely receive an advance copy of the CD before it is delivered to the Buyer/borrower.
  • The lender will likely send the CD to GRCC as the closing attorney when it is sent to the Buyer/consumer, but we will not automatically be permitted to send a copy to any real estate agents
    • Agents will need to obtain a copy from the Buyer/borrower directly, or
    • Buyer/borrower will need to sign a consent/authorization form to allow disclosure of it to their realtor if the lender is willing to accept such a form (ask your preferred lender).
  • The CD sent to the Buyer will not include the Seller’s side of the transaction, so the Seller will receive its own CD. The closing attorney will be responsible for preparing and delivering the Seller’s side of the CD and/or a separate CD for the Seller (i.e., if lender prepared the Buyer’s CD, we will prepare a separate CD for the Seller).

PRIVACY CONTROLS: The new regulations prevent any third party from being able to see any private information/mortgage-related documents for the Buyer/borrower, so:

  • The Seller can no longer be in the closing conference room with the Buyer at the time of signing. Please contact us to coordinate the Seller signing separately, but if we are not preparing that Seller’s documents, note that the Seller will need to sign with their respective attorney’s office.
  • Buyer/borrower will need to sign a consent/authorization form to allow the Buyer’s realtor to be present at signing (some real estate firms have consent forms for this purpose and/or we will have a consent form available if needed).
  • We have implemented heightened levels of privacy controls in our practice. The impact you will see most obviously are that emails from our office are encrypted when containing any non-public information regarding the Buyer’s loan and blinds and doors in the closing rooms must remain closed.

DELAY IN CLOSING: After delivery of the CD to Buyer/borrower, the following changes may likely trigger a new three-day waiting period, i.e. a closing date delay:

  • Any changes that would impact the Annual Percentage Rate on the loan, including likely,
    • Changes in seller paid closing cost credits, commission credits, etc.
    • Changes in homeowners insurance, taxes, PMI or other similar items
  • Buyer changes loan terms (amount, rate, escrows, term, etc.)
  • If a prepayment penalty is added to the loan
  • Changes and adjustments affecting the value of the property (as determined by the lender) may trigger additional disclosure and review periods under the Equal Credit Opportunity Act (ECOA) controlling the delivery of the appraisals

AVOIDING DELAY: You may consider two pre-closing inspections/walk-throughs for the Buyer, with one occurring 10+/- days in advance of closing (in which case you have time to negotiate seller credits in lieu of repairs) and a second final inspection on the day of the closing.

REVIEW/KNOW THE CD AND PROCESS: Get familiar with the new CD form and new process so that you can answer Buyer and Seller questions and keep them informed.

  • Particularly, note that the CD refers to Owner’s Title Insurance as “optional” in some circumstances. Obtain appropriate advice for the Buyer on the protections given to them through owner’s title insurance (and risks in waiving it) and contact GRCC or your affiliated title insurance company to help clarify this for your client.

CONTRACT DATES: The new TRID rules may affect the contract terms that you help negotiate for either the Buyer or the seller, i.e., a 30-day closing may be difficult and/or no longer realistic. It is important for you to communicate with the lender to determine a realistic timeframe for closings under these new rules.

CONTRACT CHANGES: Communicate any and all signed changes to the contract to the lender and GRCC immediately. To keep on target for closing, consider having a conversation with your Buyers about the need to respond to lender requests immediately and remind everyone that we have to follow the contract terms unless legally amended and provided to lender.

Download a PDF version of this article here: GRCC & TRID – What to Know.

TRID – The New Forms

GRCC & the Seven Pillars

ALTA, the national trade association that represents thousands of title and real estate professionals, maintains a list of Best Practices for the title and real estate industries, often referred to as the Seven Pillars. Below is an abridged description of these, as written by ALTA. The full text is in the Title Insurance and Settlement Company Best Practices PDF, available via ALTA’s website. Their website also contains extensive information and resources about these Best Practices and many other industry issues.

Pillar 1: Licensing

Establish and maintain current license(s) as required to conduct the business of title insurance and settlement services.

Pillar 2: Escrow Trust Accounting

Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounting allowing for electronic verification of reconciliation.

Pillar 3: Protecting NPI (Non-Public Personal Information)

Adopt and maintain a written privacy and information security program to protect Non-Public Personal Information (NPI) as required by local, state and federal law.

Pillar 4: Settlement Processes

Adopt standard real estate settlement procedures and policies that help ensure compliance with federal and state consumer financial laws as applicable to the settlement process.

Pillar 5: Title Opinions

Adopt and maintain written procedures related to title work, final title opinions, reporting and premium remittance.

Pillar 6: Insurance Coverage

Maintain appropriate professional liability insurance and fidelity coverage.

Pillar 7: Consumer Complaints

Adopt and maintain written procedures for resolving consumer complaints.

Through properly vetting our employees and providing them with ongoing training, Goosmann Rose Colvard & Cramer, P.A. fosters a secure and compliant environment. Our Firm follows all appropriate standards to meet the Seven Pillars. We have established policies and procedures based on each Pillar that are constantly reviewed and revised as appropriate.

The Firm and/or its Principals hold and maintain all necessary professional licenses and insurance policies. Properly designated, documented, and compliant financial structures and relevant standard procedures to safeguard client funds are in place. GRCC is compliant with all applicable local, state, and federal laws and regulations and performs regular audits to ensure continued compliance, updating protocols as necessary.

Protecting NPI is paramount at GRCC and a number of SOPs exist to keep our clients’ information safe. We have office-wide physical and network security policies as well as an established disaster management protocol. Encrypted, redundant backups of appropriate data and systems are maintained.

Client feedback on the Firm’s staff, attorneys, and closing process is encouraged. Forms for this purpose are available on our website. Please let us know about your experience with GRCC. We take these Best Practices seriously and work diligently to iron out any wrinkles as they are discovered.

TRID and You

In the wake of the 2008 mortgage crisis and in response to the Dodd-Frank Act, the Consumer Financial Protection Bureau (“CFPB”) developed and enacted the TILA-RESPA Integrated Disclosure (“TRID”) rule. TRID goes into effect October 3, 2015 and brings about numerous changes in the transactional real estate world. These changes affect everyone involved in closed-end real estate transactions, including buyers, sellers, realtors, lenders, and settlement agents. Jeffrey Schummer, VP of Education Development at the MBA commented:

TRID is 1,888 pages in length and affects every business functioning in the single-family mortgage market. Compliance with this new rule requires major systems and operational changes.

The CFPB developed and designed the integration of TILA and RESPA and the consolidation of forms associated with most closed-end real estate transactions to make shopping for a loan easier, as well as to protect consumers from unexpected changes at the closing table. While these changes will be a boon to all once established, the transition may be a bit bumpy at times.

There are two primary changes associated with TRID.

  1. Forms
    1. The Loan Estimate form will replace the Good-Faith-Estimate (GFE) and Initial Truth-in-Lending (TIL) forms
    2. The Closing Disclosure form will replace the HUD-1 and Final TIL forms
  2. Timing requirements
    1. The Loan Estimate must be provided by the lender within three business days of receipt of the buyer(s)’s loan application
    2. The Closing Disclosure must be delivered to the buyer(s) (by the lender or the settlement agent, dependent upon circumstances) at least three business days prior to consummation of the loan

As the professionals at Stewart Title so succinctly stated, “The Consumer Financial Protection Bureau’s whole purpose is to ensure that consumers get the information they need to make the financial decisions they believe are best for themselves and their families. As a title company we can get behind that.”

As your settlement agent, we, too, can get behind that. Be assured that Goosmann Rose Colvard & Cramer, P.A. is steadfastly working to ensure we are ready to meet the coming challenges together. There will be a learning curve for everyone in the industry, as well as inevitable hiccups. However, continued cooperation with our network of professionals, a little bit of patience all around, and a lot of communication and teamwork will guarantee a successful transition.

A phrase used often in current industry media is “Collaboration is King.” This sums the whole thing up nicely. Lenders and settlement agents, realtors and their clients, buyers and sellers will all have to work side by side to build a streamlined closing environment full of transparency and security for all parties.

Not every real estate transaction will be subject to TRID. The following types of transactions are exempt from the new rule:

  • Home-equity lines of credit (“HELOCs”)
  • Reverse mortgages
  • Loans secured by a detached dwelling, such as a mobile home, or vacant land
  • Loans written by creditors who write five or fewer notes per year

For those who are affected, or for anyone seeking further education on TRID, there are a multitude of resources available. Stewart Title has a nicely compiled list of useful links on their website. This resources page also has links regarding ALTA Best Practices, which GRCC is proud to follow.