There’s a new sheriff strolling into town, and its name is “TRID.” Unless you have not been paying close attention to the latest buzz in real estate, you are most likely familiar with the TILA-RESPA Integrated Disclosure rule (“TRID”), which is scheduled to take effect on October 3, 2015 (that is if the CFPB doesn’t delay implementation again). If you recently purchased a home (or helped a client purchase or home), you have most likely noticed that mortgage lending standards have become much more stringent, even for well qualified borrowers. Well, get ready to saddle up, because things are going to get a little more difficult once TRID strolls into town. Before we get into that, let’s take a trip down memory lane.
Relics of the Past
At the peak of the “boom years,” mortgage borrowing appeared to be, and for the most part was, fairly easy. Generally if you were breathing or could “fog a mirror” you were qualified. Remember, there were “no income documentation” loans, “stated income” loans, and “no asset verification” loans. In the “boom years,” borrowers and agents became accustomed to short loan processing and a real sense of entitlement to loan approval developed. Well, it seems we have come full circle as the CFPB has pulled back the reins on lenders.
The Rise of TRID
Welcome to a new dawn, the rise of TRID. With TRID, the lender will be running the show and the borrower will have to jump through each and every “hoop” the lender sets in front of them before issuing the elusive “clear-to-close.” The CFPB is the enforcement arm carrying the big stick and lenders are loath to miss that un-dotted “i” or un-crossed “t”, not to mention the wave of new documentation that is coming at us like a freight train in the form of the “Closing Disclosure.” Buyers, sellers, realtors, attorneys, and title agents need to be mindful now more than ever, that there is no “absolute right” to a loan approval. As a result, patience has become a necessary commodity and will be in even greater demand as we approach October 3rd.
So, What Can You Do?
Special attention needs to be given in preparing Contracts to permit sufficient time for lenders and mortgage originators to process loan applications. We believe it is fairly safe to say that in the context of Contracts with financing, gone are the days of 30 day closings. Mortgage originators have their own agendas and timetables to follow; rarely will they mesh with the agendas and timetables of the borrower. What is important to understand is that the lender is not required to make a loan, and is not a party to the Contract – the lender is in no manner, shape, or form bound to meet an Inspection Date, a Financing Date, or a Closing Date specified in a real estate contract.
As a consequence, it behooves us all to draft Contracts that provide sufficient time to obtain that precious Clear to Close. Better to allow too much time, than too little. Like lenders, sellers are not contractually obligated to agree to extensions. Prudence, at least until the industry has a firm grip on TRID, would appear to dictate that mortgage contingency dates go out 45 days, and closings in 60 days. Should you have any questions regarding the foregoing we urge you to consult with your real estate attorney.
Berlin Patten Ebling, PLLC
Article Authored by Mark Hanewich, Esq. firstname.lastname@example.org
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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