In anticipation of the upcoming October 3 start date for the new CFPB-TRID Rules (TILA-RESPA Integrated Disclosure), the Massachusetts Association of Realtors is advocating that several changes in existing practice be adopted as part of the MAR standard form purchase and sale agreement between buyer and seller. The changes, incorporated into a new Integrated Disclosure Addendum-Mortgage (embedded below and available to all MAR members by clicking here), will account for the risk of potential delays resulting from the new TRID rules, as well as impose a requirement on all parties to expedite providing information necessary to generate the new Closing Disclosure. For a comprehensive review of the TRID rules, click here.
Under TRID, there will be a new settlement statement called a Closing Disclosure, which must be issued to the borrower at least 3 days prior to closing. If that does not occur, the closing will be delayed for up to 7 days. Lenders are requiring that the information contained in the Closing Disclosure (fees, closing costs, taxes, insurance, escrows, credits, etc.) be finalized no less than 7-14 days prior to closing, to give them enough time to generate the new Closing Disclosure in a timely fashion. As with any major regulatory change such as this, we can expect delays and speed bumps for closings occurring after Oct. 3.
The new MAR Addendum attempts to allocate risk and responsibility by providing that:
- The buyer provides the seller with the name of the lender’s attorney as soon as practicable and no less than 14 days prior to closing
- No fewer than 7 days prior to closing, the Seller and Buyer must provide all adjustments and figures (water/sewer, condo fees, taxes, oil in tank, etc.) necessary to prepare the Closing Disclosure. *I would change this to 14-20 days prior to closing.
- The closing can be extended up to 3 business days in case of a TRID related delay. *I would change this to 8 days.
- No party can sue each other for TRID related delays
Practice Pointer: I do not think the MAR form goes far enough to account for the potential delays arising out of TRID. For example, if the lender does not use e-sign technology the Closing Disclosure would have to be mailed, and the closing would be delayed for 7 days, not 3 days. Moreover, lenders are advising me that they want all Closing Disclosure information in by 20 days pre-closing, so they can turn around the loan commitment and Closing Disclosure at the same time and have a buffer in case of last minute changes. Most importantly, please use some form of TRID addendum to your Offers. Do not wait for the P&S.
Note that the Greater Boston Real Estate Board standard form purchase and sale agreement is still in wide use. The GBREB has released their own version of the TRID rider, available here.