The Housing Scene

Delayed Closing? Maybe It's You

Closing on a mortgage became easier in October. For borrowers, at least.

As of Oct. 3, TRID forms are the law of the land. TRID stands for TILA-RESPA Integrated Disclosure -- with TILA standing for the Truth In Lending Act, and RESPA for the Real Estate Settlement Procedures Act -- and it means slightly fewer procedural hoops to jump through.

Borrowers will find that four key mortgage documents have been reduced to two: The new Loan Estimate -- given to you when your loan application is approved -- has now replaced the old Good Faith Estimate and initial Truth-in-Lending statement, and the new Closing Disclosure -- given to you three days prior to closing -- replaces the old HUD-1 Settlement Statement and the final Truth-in-Lending statement.

Now you will be able to clearly see exactly what you'll be paying in interest, mortgage insurance and other loan costs. You'll also be told exactly how much money you'll have to bring to the table, so there will be no surprises. And you'll be able to make sure your lender hasn't jacked up the charges from what you were originally quoted.

For now, the pressure's on lenders -- many of whom dragged their feet and pled software problems during implementation -- to get the forms done right. But that doesn't mean consumers can't gum up the works or force unnecessary delays.

For starters, as a borrower, you should know what you want in terms of loan products. The Consumer Financial Protection Bureau (CFPB) offers a suite of online tools (cfpb.gov) to help you learn about your options. Discuss your choices thoroughly with your loan officer.

Once you settle on the best mortgage for your situation and submit your application, you should receive a Loan Estimate that details the terms of the mortgage within three business days.

It's important to stick with your choice of loan -- say, a 30-year, fixed-rate mortgage over one with an adjustable rate. If you change your mind five days before closing, the whole process must start all over again, and that will push back the closing.

At the same time, Melissa Kozicki of Mortgage Builder, a Michigan-based mortgage software company, says you shouldn't feel that you have to go forward with any step in the process if you have a legitimate concern.

"Borrowers should never feel obligated to proceed," she says, but should "understand that changes could cause delays."

Ask the lender what should happen next, and when. Lenders are now responsible for the closing and the accuracy of the final closing documents -- not title companies or escrow agents -- and there are now definitive guidelines that must be followed.

Previously, the title company would prepare the closing papers after going back and forth with the lender on various fees. Then the papers would be sent to the lender for a "final blessing," says Dave Jacobin, president of 1st Mariner Mortgage in Baltimore, "but the lender still did not own them."

Now, though, Jacobin believes the new rules "will make settlements run smoother with less confusion and error. The change in regulation places more responsibility and burden on the lender, but the increased clarity of the transaction benefits everyone in the long run."

Still, you can slow the process if you don't quickly send in all the documents -- bank statements, tax returns, etc. -- needed to approve your loan. This has always been the case, but it used to be that there was a window, and it wasn't a big deal if borrowers were slow. Now, says John Meussner of California's Mason-McDuffie Mortgage, it is "imperative" that you communicate with the lender and "return requested documents immediately."

"You'd better be ready to get your lender what they need, when they need it," he advises.

As settlement day approaches, you should receive a Closing Disclosure, which is a summary of the final terms of the loan. You should compare the disclosure form with the loan estimate you were given when you first applied for your mortgage.

In the past, borrowers wouldn't see the final numbers until they sat down at the closing table. That gave them little or no time to check the good-faith estimate against the final HUD-1 settlement sheet, which often changed dramatically, or even ask questions. If borrowers were uncomfortable with the final figures or couldn't get answers, they often felt railroaded to continue. After all, the moving van was packed and the kids were waiting in the car.

Now, you have the opportunity to thoroughly check the final numbers before you get to the closing. If the figures have changed from what you were told originally, you have time to ask questions and find out why.

Finally, Ted Rood of MB Financial Bank in St. Louis warns not to change your closing date at the last minute.

"Don't set the closing for a Monday, then decide to take a long weekend and reset the date for Tuesday," he says. That would require the lender to rework the Closing Disclosure, and that means at least a three-day delay.

Above all, though, realize that you can stop the process anytime you like. You always could, but now, says Kozicki, "you have a louder voice. ... You do not have to sign a contract just because you signed an application or other documents."

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