The “Know Before You Owe” law is a relatively new regulation, effective for loans originated after October 3, 2015. It comes to us from the Consumer Protection Finance Bureau and takes nearly 2,000 pages to achieve its admittedly sound goal: Simplify the loan disclosure process for consumers of mortgage loans. According to a report on the CNN website, lenders have spent billions of dollars updating their systems to assure compliance with the law so hopefully consumers are seeing a simplified and easier to understand process. But, 90 days into the new law, how does the landscape look from the closing table, where the lawyer usually sits? Surprisingly enough, it looks pretty much the same, with one important change to the Purchase & Sale Agreemen that all homebuyers should know about: The TRID Rider.
When it comes to the legal work, the end game is still the same. The lawyer who handles the closing for the lender is still tasked with assuring the seller has clear and marketable title. Both the bank and its customer want clear title and this is where an experienced and detail oriented closing attorney earns his or her pay.
Getting to the closing table, however, has changed a bit for the legal team helping the buyers. There is a now a requirement that, three days prior to the closing, the lender provide its customer with the exact dollar figure of how much money they are going to have to bring to the closing table. Given the new 3 day disclosure rule, lawyers throughout Massachusetts have almost universally agreed to add the so-called “TRID Rider” to all Purchase & Sale Agreements. The TRID Rider anticipates lender glitches with the new deadline requirements and allows for extensions of the closing date so that the lender can be in compliance with the law. By the way, TRID is the insiders’ acronym for “TILA and RESPA Integration Disclosure” and is reflective of the regulators’ intent to eliminate two old regulations and replace it with one new law. Insiders love to use acronyms and TRID is an acronym that incorporates other acronyms, so it has really caught on!
Every deal involving a mortgage loan should have a TRID Rider. It provides flexibility in closing dates just in case a buyer’s lender needs more time to comply with the three day rule. Prior to TRID, parties could rely upon closing dates and manage their lives accordingly by scheduling movers, leaving rentals and so on. But now, these dates are subject to change, dependent on the bank’s systems and its ability to comply with this extremely complex law. Thus, if a buyer’s lender, for any reason, hasn’t met the TRID deadline, the buyer can extend the closing date to give the bank a chance to get its ducks in a row. The sellers, having agreed to the TRID Rider has to accede to this extension request. Hopefully, those sellers weren’t planning on buying a different house on the very same day they were planning on selling. But it’s not as bad as it sounds, because the sellers probably had a TRID Rider on their purchase contract and that TRID Rider will give them the right to extend that closing too! So one thing lawyers have found is that although the buyers may “know before they owe” they don’t necessarily know when they will actually start to owe it!