The new TILA-RESPA Integrated Disclosure rule, also referred to as "Know Before You Owe," went into effect Oct. 3. For the past few months, Silicon Valley REALTORS® have been preparing and briefing their clients for the change in forms, so no delays will occur with their transactions.
At the Silicon Valley Association of REALTORS®, affiliate members Connie Montalbano-Hill and Desiree Baker, both with Fidelity National Title, explained the fine points of the new rule to the REALTORS® - what's different and what REALTORS® can do to make sure a transaction won't fall through. Theirs was one of many presentations title officers and lenders have made to local REALTORS® to help them prepare for the new rule.
The new forms are a consolidation of several forms. The Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosures will be combined into a new form called the Loan Estimate. The HUD-1 and the final Truth-in-Lending disclosures will be combined into another new form called the Closing Disclosure.
Timing is critical. According to the Consumer Financial Protection Bureau, the Closing Disclosure must be delivered and received three days in advance of "consummation" of the loan. "Consummation" will typically be the day loan documents are signed, which is usually at least one day in advance of closing but could be more. If the Closing Disclosure is not actually received in person, the new rules require an additional three-day period if it is delivered by mail or electronically.
Baker said three changes would require a new 3-day review: if the APR increases by more than 1/8 of a percent for fixed rate loans, or ¼ of a percent for adjustable loans.; if a prepayment penalty is added, making it expensive to refinance or sell; and if the basic loan product changes, such as a switch from fixed rate to adjustable interest rate or to a loan with interest only payments.
The title company representatives said the new rule ensures that the lender take more of a leadership role in the transaction; however, they stressed every lender is different. That's why it is very important that there be good communication between the REALTOR®, the lender, the title officer, and the client.
"Know your client well, so you avoid surprises," said Montalbano-Hill. "Take care of the details ahead of time. The more you know your client, the better."
Montalbano-Hill noted that a change in the name of the newly married spouse, for instance, can cause problems if not disclosed to all parties.
Baker added, "Don't make assumptions. Everyone is going to have to be on the same page at the same time."
"Our REALTORS® have worked hard to prepare for the TILA-RESPA Integrated Disclosure. We know there will be challenges ahead, especially in the beginning, as is the case when any new rule comes in place. It's important to take extra time to make sure all parties are in sync and to have open communication among all parties involved in the transaction," said Chris Isaacson, president of the Silicon Valley Association of REALTORS®.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.