A year ago almost everyone in the real estate business was dreading the implementation of the TILA-RESPA Integrated Disclosure rules, also known as “Know Before You Owe.” Realtors, mortgage brokers and real estate attorneys often talked about it like their world would be turned upside down by buyers needing to see their final numbers three days prior to closing or over the possibility that a closing could be delayed for three days.
I viewed it as a great way to decrease buyer anxiety in the days leading up to closing and the day of. I admit when I first heard about it in the fall of 2012, I was suspicious as well. I tend to be hesitant about any additional government intervention or regulations. However, I was fortunate enough to be invited to a meeting in November 2012 with a few other Realtors and Richard Cordray, director of the Consumer Finance Protection Bureau, along with some of his top people. It was at that meeting that I realized my concerns were wrong and that they really were out to help buyers and improve the process. A lot changed between that meeting and the date it all got implemented on Oct. 3, 2015, but I had confidence all along that it would work out.
For as long as I have been doing this (12 years), buyers have been receiving their closing numbers right before, or at, their closing. A buyer would be lucky to see a HUD the night before closing. This only added to buyer anxiety, which is already very high at this time, and we Realtors tend to end up dealing with the brunt of a buyer’s frustration. In addition, HUDs were very confusing for buyers to read. This is why I embraced the idea of buyers receiving their numbers three days prior to closing. In addition, the new closing disclosures are a lot more clear and explanatory.
Working Together Works Better
Shortly after the implementation date last November, home sales did dip nationally. The haters were so happy to blame TRID – and while there’s no doubt that was the reason home sales were down, all it did was delay them to December, because Realtors scheduled longer closing dates in October. Home sales in Massachusetts actually were not down, but it did have an impact. We even noticed that many deals that came together in November were scheduled for January closing dates, when in years past most would try to close by year’s end. This decreased December sales (although sales were not down compared to December 2014) and substantially increased sales in January. Home sales were up 28 percent in Massachusetts, which made it the biggest January since 2005. In the end the sales will even out.
Most Realtors switched from 30- to 45-day closing timeframes to 50 to 60 days, all because of these three extra required days – which really wasn’t necessary, but it’s understandable until everyone is familiar with these new processes. We are already seeing signs of closings going back down to 30 to 45 days. The fact is the mortgage brokers and real estate attorneys who were prepared didn’t really have any delays because of it. Closing delays were an everyday occurrence for many years prior to TRID, but now they are much more rare.
While the extra time has certainly helped alleviate closing delays, the real reason is that, due to TRID, everyone is working together in a more proactive fashion. It had a trickledown effect; Realtors have been asked to negotiate longer closing dates, buyers are reminded more often to get their mortgage brokers what they want, when they want it. Real estate attorneys are contacting each other sooner and working together by pulling title earlier and doing whatever they can to be prepared for closing. Buyers seeing their numbers earlier has prevented last-minute freak-outs and fire drills, which in turn decreases closing delays. Now when there is a problem or a question, it is worked out days in advance instead of the morning of or even at the closing.
While research from the National Association of Realtors suggests that about 9 percent of closings have been delayed by TRID, I would argue that a massive percentage of closings are not being delayed at all because of all the proactive measures I mentioned above. There are far fewer delayed closings overall.
I also understand that TRID may be a bit more problematic for smaller banks, and there are also some issues on the secondary mortgage side, but I remain hopeful that the leaders on both sides will come together and sort that out.
From a ground-level perspective, it’s been a wonderful change and has been great for our industry.
Anthony Lamacchia is broker/owner of Lamacchia Realty Inc., a full-service real estate brokerage serving Massachusetts and South New Hampshire.