How the Implementation of TRID Has Impacted Closing Dates in the Real Estate Industry
Why did the implementation of TRID impact closing dates?
The implementation of the TILA-RESPA Integrated Disclosure (TRID) regulation, which came into effect on October 3, 2015, significantly impacted the closing dates for mortgage loans. This comprehensive rule was designed to simplify the mortgage loan process for consumers by combining two previous regulations—the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA)—into a single set of disclosures. However, the transition to TRID brought about several challenges that delayed the closing process for many borrowers and lenders. This article explores the reasons behind the impact of TRID on closing dates.
Complexity and Training Requirements
One of the primary reasons for the impact on closing dates was the complexity of the new regulations. The TRID rule introduced a new Loan Estimate and a new Closing Disclosure, which required lenders and settlement agents to understand and comply with the new requirements. The training and implementation of these changes took time, and many lenders were not fully prepared for the transition. As a result, the process of preparing and reviewing the new disclosures became more time-consuming, leading to delays in closing dates.
Increased Documentation and Verification
TRID also introduced stricter documentation and verification requirements. Lenders were now required to verify the borrower’s identity, income, and assets more thoroughly than before. This additional scrutiny meant that lenders needed more time to gather and verify the necessary documents, which prolonged the loan approval process. Borrowers also had to provide more information, which could lead to delays if they were unable to do so promptly.
Communication Breakdowns
Effective communication between lenders, borrowers, and settlement agents was crucial for a smooth mortgage loan process under TRID. However, the new regulations often resulted in breakdowns in communication. For example, if a lender failed to provide the borrower with the required Loan Estimate within the specified timeframe, the borrower might not be able to proceed with the loan application. Similarly, if settlement agents did not receive all the necessary information from lenders, they might not be able to prepare the Closing Disclosure on time. These communication breakdowns contributed to the delays in closing dates.
System Upgrades and Integration
To comply with TRID, many lenders had to upgrade their loan origination systems (LOS) and integrate them with their settlement platforms. This process was not without its challenges, as some lenders faced technical difficulties and system malfunctions. These issues could cause delays in the loan processing and ultimately affect the closing dates.
Conclusion
In conclusion, the implementation of TRID had a significant impact on closing dates due to its complexity, increased documentation and verification requirements, communication breakdowns, and system upgrades. While the intention behind TRID was to simplify the mortgage loan process and provide consumers with greater transparency, the transition to the new regulations resulted in unintended delays. However, as lenders and settlement agents have become more familiar with TRID and have made the necessary adjustments, the impact on closing dates has begun to diminish.
