Starting October 3rd, the Knoxville real estate world as we know it will be impacted by a sweeping changes from the Consumer Financial Protection Bureau, or CFPB. These changes will affect the all real estate transactions for buyers, sellers, realtors, lenders, and title companies.
Knoxville buyers will be one of the largest parties that is affected by these change. If you’re thinking about buying a home after October 3rd, here is a breakdown of what the changes entail and how it will affect buying a Knoxville home.
What Is TRID?
TRID is the name of the new rule set forth by the CFPB. It stands for the TILA RESPA Integrated Disclosure Rule. Of course, to make things more complicated, this new rule contains an acronym within an acronym, so we’ll breakdown the acronym further. TILA stands for Truth in Lending Act and RESPA stands for Real Estate Settlement Procedures Act.
Under TRID, two new forms were created to help buyers better understand their mortgage and to help keep them safe. Instead of the Good Faith Estimate, buyers with loan applications after October 3rd will receive a Loan Estimate (LE) and instead of seeing a settlement statement (HUD-1) at closing, buyers will receive a Closing Disclosure (CD). These forms have been changed to be easier for buyers to understand.
Why Are Things Changing?
The CFPB created the TRID rules to help protect consumers applying for loans. After the housing market meltdown in 2008, where many homeowners lost their homes to foreclosure or short sale, TRID was created to make the loan process more understandable and transparent. These changes hope to make borrowers better informed about the loan they are applying for and the true costs of a mortgage.
What Does TRID Change For Buyers?
(1) The largest change you will notice as a buyer is the change in forms. The Loan Estimate replaces the Good Faith Estimate and the Closing Disclosure replaces the HUD-1. If you’ve bought a home in the past, you will notice the CD and the LE are very similar and they are much easier to read than their predecessors.
(2) In the past if you’d been buying a Knoxville home, you may receive a copy of the settlement statement two days in advance or two hours in advance, depending on the situation. Under the new TRID rules, the CD must be provided to the buyer 3 days in advance. By giving the borrower 3 full days to review the closing disclosure, buyers will have more time to understand and review it.
(3) In the past, any changes to the settlement statement could be made last minute. Under the new guidelines, with the CD coming out 3 days prior to closing, certain changes to the CD could potentially delay closing. Fortunately, the 3 reasons that would delay closing happen very rarely, those reasons include: (1) a change to the HUD making the APR inaccurate (2) change in loan program (3) pre-payment penalty added to the loan. Things like adding last minute repairs onto the HUD after a final walk-through should typically not delay closing, however, adding anything to the CD will up to a lender’s discretion and approval.
(4) During the first few months of these regulations, your home buying timeline should be longer. These changes are a significant change to all parties in the real estate world. Lenders and title companies are working with completely new forms, new software, and new staff members hired on for the changes. In order to give all the new systems some time work out the kinks, it’s probably wise to plan on a close date of 45 or 60 days out when you’re writing and offer.
(5) Finally, TRID also takes significant strides in protecting your personal information. All parties in the transaction are required to do things like maintain a secure server and encrypt emails, in order to protect your personal information (i.e. social number and financial information). Still, with all of these changes, people like your Realtor will not easily have access to your information as they have in the past. In the past, a Realtor would typically receive the settlement statement and go over it with the buyer. Now, the buyer will receive the closing disclosure and if they want to go over it with their Realtor, they will have to pass it along to their Realtor. Under these new changes, buyers are going to need to take more initiative themselves to pass along information to parties involved in the transaction with who they want their personal information shared. For example, if you’re going to want your Realtor to review the closing disclosure with you prior to closing, you will need to be the one who shares it with them.
Bottom Line – Change Is Good, But It Takes Some Adjustment
TRID is significantly changing the real estate world for all the major players involved in every real estate transaction. Lenders and title companies have been preparing for months to become compliant with these new changes. With such significant changes and such hefty fines for those that don’t comply, there are many lenders and title companies who will go out of business.
Realtors, lenders, and title companies who survive these changes and remain compliant will have worked months to prepare and remain in business. Still, the good thing is that those that survive these changes, will be the best in the business. These changes may be hard to adjust to at first, but they will result in a better closing experience for buyers and sellers.
Are you thinking about buying a Knoxville home this year? Please let us know if there is anyway that Knoxville Home Team can assist you. Rick can be reached at 865-696-9002 or via email at [email protected]. Kati can be reached at [email protected]. Also, be sure to check out our Knoxville Home Search Page.
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