What is TRID
TRID is the latest fallout from the Mortgage and banking crisis. I know much of that seems like a long time ago, and it was, but the wheels of government turn pretty slowly. TRID is an "updated" version of documents that have been used to get mortgages and transfer property for a long time, and they have "simplified" and "clarified" them. Those words are in quotes, because I'm not sure they've done either of those things, but that is what they are supposed to do.
Fundamentally, TRID is trying to prevent borrowers (generally buyers of homes) from discovering fees, costs, or conditions that they weren't aware of at the closing table. TRID does a lot more than that, as it puts a lot of conditions on lenders and some on real estate agents, but as far as buyers and sellers of houses go, this is the main outcome of TRID.
TRID could delay
your home closing, and will
be a real test for lenders
large and small
To be fair, there were problems in this area. Currently, banks are very slow in issuing "clear-to-close" orders, which allow closings to proceed. "Clear-to-Close" is the final sign off for banks, and it means they will lend money to the borrower. Oftentimes over the past two years, clear to close happens days, and sometimes hours, before closing, which has made much of the process for buyers both stressful and difficult. Sellers are affected as well, since buyers often extended their loan commitment clauses right up until closing, which meant if the closing did not happen, the seller would have been in quite a fix.
How Will TRID Fix Things?
Well, we don't know that it will actually, and there are a lot of folks - attorneys, lenders, and real estate agents - who are greatly worried that it will make things worse, before they get better. But the premise here is simple - the buyer must know all the factors of closing on their loan a minimum of 3 days (and in some instances more days) before closing. If ANYTHING changes, than the clock starts over. Previously, if there was a mistake on the HUD, it could get corrected at closing, often within hours, and certainly within a day. Banks had to approve HUDs, generally, but the attorneys in Massachusetts were responsible for much of that quick turnaround. Now, banks are going to be responsible for the buyer end of the HUD, so a quick turnaround is much less likely. Lenders - to be safe - will probably have to issue clear-to-close at least 7 days before the closing, and the HUD (to be safe) will need to be done and approved at least 5 days before the closing. Anything less is flirting with a disrupted closing for all parties.
If this works, it will be fantastic for buyers and sellers. Sellers will know at least a week before closing that they are going to close, and buyers will know to. This is the Hope and Promise of TRID.
Unfortunately, those of us who are close to the process are not optimistic that this will work in all cases. Only a small minority of my loans - regardless of lender - have been clear-to-close this far ahead of time. I'm not exactly sure what the banks are going to do differently where they "all of a sudden" can get this done on time. In addition, small errors are very common, and some of these may require a delay. Lastly, it is not clear that the banks have enough people to get these loans out the door when things get busy, like in the spring housing market.
How Can Buyers and Sellers Prepare for TRID?
All buyers and sellers should become familiar with tracking their loan status. Knowing if a loan is clear-to-close is key, and sellers should have a copy of the HUD four days before closing. If you don't, you probably aren't going to close on time. That means sellers will need to make sure that final water and sewer readings, oil readings, and other commonly transferred costs are known at least 10 days before closing. Each party should review the HUD very carefully, to make sure there are no mistakes, because finding them at closing is too late- they probably can't be fixed. The whole process could be derailed for 3 business days if a fix is required.
Be clear on the consequences! If a re-disclosure is required, an entirely new 3 day window will start! And there is nothing anyone will be able to do to shorten that window, although there are other ways that things could mostly stay on schedule.
Bottom line, is until lenders and attorneys figure out where the weak points are in the process, it's going to be a bumpy ride for anyone closing on a home this fall. Hopefully this will prepare you a bit for what's coming.