3 Conditions that Trigger the Need for a New Closing Disclosure

---

Filed under: TRID

---

As you probably already know, the new rules set forth by the Consumer Financial Protection Bureau back in October of 2015 (we refer to it as TRID) had significant impact on the mortgage industry and the closing process for home buyers and anyone refinancing.

One of the most notable changes is that lenders now have to provide a closing disclosure to borrowers and allow them 3 business days to review it prior to signing loan documents.

This disclosure allows the buyer to have the time to fully understand the terms of their loan prior to signing their loan documents and also to protect the buyer/borrower from unexpected changes to their loan at the last minute.

There are 3 conditions that, if they are changed once the closing disclosure statement is issued, force the lender to re-issue the disclosure, start the 3 day review process over again, and could potentially delay the close.  All of these issues have to do with the buyer’s financial future, and therefore are very important.

1.  An increase to the borrower’s annual percentage rate (APR) above .125%, due to an increase in the interest rate or an increase in the fees to the loan.
2.  The addition of a prepayment penalty.
3.  A change in the loan product – such as a switch from a fixed rate loan to a variable rate loan.

Situations such as discoveries during a walk through (plumbing issues, new seller concessions, new agreements buyers make with sellers to buy personal property) do not trigger the need to “start over” with a new closing disclosure and three day wait period.

Sometimes there is confusion over what conditions require a new closing disclosure and new 3 day review period and what conditions do not.  So if you have any questions about this or any of the other new TRID guidelines and procedures, please feel free to give me a call and discuss.

Being informed and staying informed is a responsibility that all real estate professionals (lenders, Realtors, escrow, and title) should assume and communication is a big key.

 

---