The Consumer Financial Protection Bureau (CFPB) is scheduled to usher in a new era in the residential mortgage industry on October 3, 2015 with a new regulatory framework known as TRID (TILA-RESPA Integrated Disclosure).
(Editor's note: an earlier verison of this article stated the original implementation date, which was August 1st. The CFPB announced the implementation delay on July 21st. Read more.)
Even though we are about two months away from the new rules, many remain uncertain. To assist, we have compiled simplified information about the new regulations and how they may affect your relocation policies and transferring employees.
Overview of the Changes
- The Truth-In-Lending Disclosure and the Good Faith Estimate are being replaced by one document – the Loan Estimate.
- The HUD-1 will be replaced by the Closing Disclosure (CD).
- Timing requirements will be different:
- The new Loan Estimate must be delivered by the third business day after the loan application.
- The CD must be delivered to the homebuyer at least three business days prior to closing.
Implications to the Lender and Home Buyer
The new time requirements will force lenders to prepare, deliver and be responsible for the CD themselves, rather than handing it completely off to a closing agent. This could cause confusion and delay early on in the transition to the new regulations.
For lenders, they may need to collaborate with closing agents as early as 12 days prior to closing so the CD can be reviewed six days prior to the closing date and delivered in time to the homebuyer.
The learning curve on the new regulations may cause delays in the closing process initially, as many lenders have reported in industry surveys that they are not ready for the changes.
What Does it All Mean?
For traditional home sale programs, human resource and mobility managers should be prepared for delays by the buyer’s lender. These delays may result in additional carrying costs. In the case of a destination home purchase, delays can lead to additional costs in hotel stays or temporary housing and household goods storage. This in turn may lead to productivity loss and undue stress to the employee.
Get Ahead of the Issue
There are several steps employers can take to reduce possible delays and unintended consequences of the new regulations:
- Using preferred real estate networks, lenders and a closing network will help support an employee through the relocation process.
- As home purchase or sale closings may take longer than the typical 30 days, household goods shipments should be set for several days after closing.
- Advise employees to have all their financial documentation in order before the loan application and contracts need to be crafted in accordance with the new TRID regulations.
Currently, regulators, lenders and other real estate-related businesses are scrambling to understand and prepare for the new TRID regulations. We may be in for a bumpy ride initially until lenders learn and adjust to the new documentation and requirments. Using the advice above, savvy relocation management professionals can help alleviate the negative outcomes that may lie past October 3rd.