Many professionals in the housing industry saw Oct. 1, 2015 as a day of doom.
After the devastating mortgage crisis that began in 2009, the Consumer Financial Protection Bureau (CFPB) drew up new closing disclosures designed to inform and protect consumers. The regulations included a multitude of procedures and stiff penalties for noncompliance.
The launch date was set for the first day of October.
Realtor Joyce Smith, compliance broker for the Keller Williams Realty office on East Brainerd, remembers dreading the arrival of what everyone was calling TRID (TILA-RESPA Integrated Disclosures).
“We didn’t want more changes,” she says. “We didn’t want to have to learn something new.”
Realtor Jennifer Grayson, managing broker at the Crye-Leike office on Gunbarrel Road, was just as concerned. “We thought TRID would be a nightmare,” she adds.
Realtors weren’t the only ones anxious about TRID. Professionals at every step of the home buying process were worried, including loan officers and closing agents.
Nina Boss, owner of Century Title & Escrow, had issues with specific changes TRID was about to impose on her industry.
“We were concerned about the way we were going to have to disclose title premiums,” she says. “It was ridiculous.”
One year later
After a year of dealing with the changes TRID introduced, Grayson has changed her tune. TRID has not been horrendous, she says, but has actually improved the process of helping buyers to obtain a mortgage.
The keys, says Grayson, are staying organized and working with people who know what they’re doing.
“Realtors only experience worst case scenarios when they work with lenders or title agents who don’t understand the procedures and changes have to be made at the end,” she explains. “This forces you to re-disclose and go into a three-day waiting period.”
Before TRID, the HUD-1 statement, which itemized services and fees charged by the lender when a buyer applied for a loan, could be given to the buyer and seller one day in advance.
This gave the buyer very little time to read and make sense of everything on the page. Under TRID, the closing disclosure, which contains the information previously found on the HUD-1, must be provided three days before closing.
Grayson likes the waiting period because it gives the buyer enough time to understand and consider his or her options. This makes the process of obtaining a mortgage less stressful.
“Buyers can shop around,” she points out. “They receive the information they need and then they have a few days to tell the lender if they want to proceed.”
Subject to interpretation
While the waiting period has benefitted buyers and received positive feedback from Realtors, the closing disclosure has also caused some dissonance due to variations in how different Realtors, lenders and closing agents interpret the corresponding regulations.
Before TRID, Realtors were able to see the closing disclosure in advance. Today, title companies are unable to send disclosures to Realtors – or at least that’s what Smith says.
“We used to be able to explain the closing disclosure to our buyers,” Smith says, “but now we’re not allowed to see it in advance.”
That’s not necessarily so, counters Karen Flores, mortgage loan originator at the SmartBank branch on Gunbarrel Road.
“That’s subject to interpretation,” Flores says. “When you need to reissue a closing disclosure, some lenders say you can share it with the real estate agent if the borrower gives you permission. Other lenders say sharing that with the agent is a breach of the borrower’s confidentiality.”
The occasional vagueness of TRID is a cause of universal annoyance, all four ladies agree.
“I don’t close just for Karen; I close for every lender, and they all have different ideas about how to do things,” Boss says.
Boss has a simple solution for resolving uncertainties – when in doubt, she asks her lawyer. “If I have a question, I go right to our attorney and ask if it’s within the guidelines,” she explains.
Things are complicated
Another concern shared by Realtors, loan officers and closing agents is the complexity of the paperwork.
To help buyers understand the costs and risks associated with their new mortgage, TRID merges the Good Faith Estimate and initial Truth in Lending disclosures into the Loan Estimate. In addition, the closing disclosure combines the HUD-1 and final Truth in Lending disclosures.
The amount of information these forms require can overwhelm a buyer, says Flores.
“I think TRID’s efforts to simplify the mortgage process are admirable,” she adds. “But it’s still a lot of information for someone who doesn’t work in the mortgage industry to grasp.”
Trust is the crucial ingredient in diffusing a customer’s feelings of being overwhelmed, Flores says.
“Borrowers typically look at the paperwork and then look at me. They have to decide to trust my integrity and my ability to explain the documentation to them.”
Even with someone holding their hands, buyers become frustrated with the amount of information they’re asked to provide.
“Lenders are requiring a lot of documentation, and buyers feel like they shouldn’t have to supply it,” Smith says.
“I can’t count the number of times a borrower has asked me how quickly we can close a loan,” says Flores. “I always ask them how likely they are to argue with me when I ask for documentation.”
Consumers aren’t the only ones subject to information overload; Realtors are juggling more data than ever. To help agents keep pace, some companies have added even more paper to the pile. Keller Williams Realty is one such brokerage.
“We’ve implemented a lot of checklists to help agents keep up with the timeline and track all of the information they have to go over with buyers,” Smith adds.
Yin-yang disharmony
In the end, the ladies say TRID has its good and bad points.
For example, Boss likes how TRID splits closings into separate meetings with the buyer and seller to keep the buyer’s information confidential. “That’s a good change because the seller isn’t there while I’m going over the buyer’s personal details,” she says.
On the other hand, Boss is still unhappy with how she has to disclose title permits. Grayson isn’t a fan, either.
“It’s confusing,” Grayson says.
“I agree; it’s not clear,” Boss adds. “We haven’t changed our rates, but the way we disclose them is different. If the contract says the seller is going to pay for the owner’s policy, then I’m going to charge them for an owner’s policy. But that’s not what goes on the closing disclosure.”
According to a survey conducted by the American Land Title Association (ALTA), the title permits puzzle homebuyers as well. During the survey, consumers were shown compliant closing disclosures, which displayed title insurance premiums according to the CFPB’s rule. Respondents were then informed of the actual cost of title insurance. The survey measured their reactions.
Most of the people surveyed found the rule confusing and deceptive.
“That’s the worst thing about TRID,” says Boss. “My industry fought it.”
Leave well enough alone
Grievances aside, the ladies would prefer the CFPB leave TRID alone. They’re learning to roll with the changes and fear what might happen if alterations are made.
“We have a high tolerance to pain in the mortgage industry and we’re tolerating these changes because we want transparency with the consumer,” Flores says. “We want them to understand what they’re signing.”
Realtors have embraced TRID, Grayson says, and are not eager to see more changes sent down the pipeline.
“The regulations are here to stay, so we should just do what we’re supposed to do and not rock the boat,” Grayson says. “If we ask for changes, the outcome might be worse than what we have.”
Boss isn’t completely sold on TRID, but like her colleagues, she was expecting worse. “It’s not as bad as I thought it was going to be,” she says.
In other words, Oct. 1, 2015 might not have made anyone entirely happy, but it was no day of doom.