The Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act were integrated by order of the CFPB in 2013. New rules under the Know Before You Owe Mortgage Initiative took effect in October 2015. These are also known as TRID rules. These new rules update what must be disclosed in connection with mortgages. At Pulgini & Norton, our Boston real estate lawyers understand that real estate transactions may be confusing for the average consumer or seller. We can provide knowledgeable and experienced legal counsel from the start of the process through the closing.TRID Rules
The goal of TRID is to give consumers a streamlined process whereby they can understand and evaluate mortgage products before they sign a deed of trust or a note. The rules set forth in TRID clarify the reporting that must occur if you need to get a loan to buy a house.
For example, a Loan Estimate replaces the Good Faith Estimate. Historically, the Good Faith Estimate was provided within three days of applying for a loan. Buyers could shop around to compare the loan costs by using information that the lender was required to disclose, but some of the information was not always clear to buyers when looking from one type of loan to another. The Loan Estimate is standardized and clearer so that each lender provides information that a buyer can use to compare. When taking out a loan, it is crucial to understand what you are undertaking, and the TRID rules provide information that allows you to have a better understanding.
These rules alter numerous aspects of residential real estate transactions, including how long it takes to get to the closing. Due to these new disclosures, lenders are unlikely to be able to get to the closing within 30 days. This means that when drafting the purchase and sale agreement, you will need to consider a reasonable timeline so that certain steps are taken earlier.
One of the dates that must be specified in the purchase and sale agreement is by which day information must be submitted to the closing attorney. The borrower is required to have the Closing Disclosure three days before the closing when the disclosure is sent electronically, and the lender needs time to prepare this document. In Massachusetts, an attorney must be involved with the closing, so it is crucial to work the date by which the Closing Disclosure must be sent into the agreement.
Another potentially challenging area is when a seller needs to make repairs. In Massachusetts, there are very few disclosures that a seller must make by law. However, under TRID, property repairs are supposed to be disclosed in the purchase and sale agreement, as well as to a lender, so there can be no side agreement separate from the purchase and sale agreement by which these repairs take place.
Moreover, in most cases, there needs to be a home inspection before the lender issues the Closing Disclosure. When there are problems with the repairs, this may delay the lender's ability to issue the disclosure within the appropriate timeline. It may also create some difficulties related to the purchase price in that the value of the home may vary slightly based on whether repairs are performed or not.
For many sellers, it makes more sense to agree to a closing cost credit for the buyer in the purchase and sale agreement than to make the repairs, due to the impact of the TRID rules. Most lenders will only allow a certain amount of credit to be provided by a seller to a buyer. However, it is not true in every case that a closing cost credit is a better way to go than simply making the repairs, and it may be important to consult with an attorney about your particular circumstances.Retain an Experienced Boston Attorney for Your Real Estate Needs
Many buyers and sellers are not quite sure of their rights and obligations when entering into the purchase or sale of a home. The TRID rules have changed what needs to be done and which language is necessary in connection with a real estate purchase and sale agreement. It is critical to retain a Boston attorney who understands these relatively new rules and how they apply to your situation, whether you are a buyer, seller, or lender. At Pulgini & Norton, our experienced property transaction attorneys can advise you on the transaction and the applicable TRID rules. Our firm handles real estate transactions in Andover, Cambridge, and Braintree, among other Massachusetts cities. For a consultation, contact us online or at 781-843-2200.