December 22, 2015
Troubles with TRID
Law360 quoted me in Rule-Driven Home Sale Slump Could Be Temporary. It reads, in part,
A slump in existing home sales in November can be traced to the implementation of a new Consumer Financial Protection Bureau mortgage closing regime, although experts say that most of the closing delays could ease as the industry and consumers get more comfortable with the new rules.
The National Association of Realtors released a report Tuesday saying that while a continued lack of inventory of existing homes for sale and other factors helped drive down the number of completed home sales in November, the number of signed contracts for home purchases remained relatively constant. With that in mind, the Realtors pointed to the CFPB’s TILA-RESPA Integrated Disclosure rule, which combined two key mortgage disclosure forms and went into effect in October, as the reason for the slowdown.
That slowdown was anticipated because real estate agents and lenders had reported difficulties in complying with the rule, which combined closing forms required by the Truth In Lending Act and the Real Estate Settlement Procedures Act, prior to it coming into effect. However, experts say that the closing delays are likely to decrease as the industry understands the rule better and technology to comply with it improves.
“It’s like a python swallowing a boar … the boar has to work its way through the python,” said David Reiss, a professor at Brooklyn Law School.
The National Association of Realtors reported that existing home sales slumped to 4.76 million nationwide in November from 5.32 million in October, a fall of 10.5 percent. That October figure was also revised down from an initial estimate of 5.36 million.
The November figure was also down from the 4.95 million existing sales figure from the same period last year, and put total existing home sales 3.8 percent behind the total from last year, the National Association of Realtors said.
While the real estate industry group cited the usual factors of tight supply and inflated prices in many regions of the country as a reason for the slowdown in existing home sales, it also cited the TRID rule’s implementation as a reason for the slump.
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Most lenders, real estate agents and other market participants had already begun to factor in the new TRID requirements in the closing process, adding 15 days to the usual 30-day closing process, said Richard J. Andreano, a partner at Ballard Spahr LLP.
“When I saw the November drop, I thought that was a natural consequence of correct planning,” he said.
Despite the slowdown, Yun said in the NAR release that because contracts were signed and the problems came down to issues with closing.
“As long as closing time frames don’t rise even further, it’s likely more sales will register to this month’s total, and November’s large dip will be more of an outlier,” he said.
The CFPB, Reiss and Andreano all agreed that at least some of the delays will work out of the system as the industry gets more accustomed to TRID’s changes.
“The ones that have adjusted have done it by adding a lot of staff, either reallocating or hiring and assigning them to the closing process to get it done,” Andreano said.
And the delays that remain may not be a bad thing, Reiss said.
“It really keeps consumers from being surprised at the closing table. This gives a little bit more time to the consumer where they’re not getting waylaid,” he said.
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