That’s right. Thanks to a new rule from the Consumer Financial Protection Bureau, 30-day closings may become a thing of the past for financed purchases. The “know before you owe” rule, formally known as the TILA-RESPA Integrated Disclosure (TRID), is designed to protect the consumer from any last minute changes in the costs associated with the loan. Any minute changes to the costs must be redisclosed to the consumer prior to the closing and the lender must allow three business days for the consumer to review the changes.
Doesn’t sound so bad, right? Probably not. Although last minute changes can cause problems in a real estate transaction. They can even cause the transaction to come apart. Imagine for a minute that you are selling your home. You have completed everything that has been asked of you and it is the week of your upcoming move. Then at the last minute, your buyer’s lender must redisclose a change in the buyer’s costs thus delaying the closing date. You have movers scheduled. All of your utilities are scheduled for transfer. And the seller of the home you are purchasing is counting on the funds from their sale to purchase a new home. Can you see how this could get messy pretty quickly?
Or let’s say you are a buyer out there in today’s market and you are ready to compete for a home. A great home comes on the market and you write an offer. A strong offer. But the seller needs a 30-day closing and your lender cannot accomplish that timeline due to TRID. It is already hard to compete against a cash offer. It may be even harder now because cash buyers may be the only ones who can accomplish a 30-day or less closing.
Although the new TRID regulation will cause some challenges, lenders and title companies have been aware of this new regulation since the fourth quarter of 2014. Therefore, they should be prepared. The new regulation was scheduled to start as of Aug. 1, 2015. However, the CFPB announced this week that they would be delaying the roll out until Oct. 1, 2015.
“We made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks,” said CFPB Director Richard Cordray. “We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time.”
Isn’t that sweet.
As you are making real estate plans for the future, please take into account the additional time that it may require to get to the closing table. It may also require a little patience as well.
Photo Credit: Dafne Cholet on Flickr.com