In December 2015, the National Association of Realtors (NAR) reported a precipitous 10.5% drop in sales of existing homes. Many were quick to point fingers at the recently-implemented TRID (TILA-RESPA Integrated Disclosure) rule and its new closing demands as the culprit, but a recent article in Forbes questions how warranted the criticism really is.
TRID became effective October 3, 2015. The goal of TRID is to make the mortgage process more transparent for homebuyers, and this has created new timelines, forms, and best practices for lenders and realtors.
TRID’s Effect on the 2015 End-of-Year Sales Market
So why are real estate professionals blaming TRID as the cause of the sales slowdown? For one, it slowed down the timeframe for closings considerably by adding three days to both the front and back of the mortgage process. In November 2014, the average mortgage loan took an average of 36 days to close; one year later, after TRID’s implementation, that number is now close to 41 days.
Other Contributing Factors
The delivery requirements for the Loan Estimate and the Closing Disclosure Form are significant, but there are other elements at play. Signed purchase contracts, a critical indicator measuring pending home sales, were in decline for several months before November. Additionally, inventory and affordability challenges continued to hold back sales for a large buyer pool. Finally, professionals in their mid-30s— a demographic commonly associated with home purchase — are choosing to stick with rental options more than in years past.
Misplaced TRID Backlash
Mark Greene of Forbes states that the media and mortgage leaders’ position that TRID is to blame for the November slowdown is hasty and inaccurate. TRID did not cause the delays in closing, he says; rather, lenders and mortgage professionals who were unprepared to adapt to the changes did. Instead of blaming the policy itself, Greene says that these entities should pay special care to reviewing borrower information, delivering forms in a timely fashion, and ensuring complete TRID compliance. Many lenders may find this position difficult to accept, but with little assistance coming from Congress or the CFPB, there’s value in acknowledging the reality of the situation. That’s the only way lenders will be able to create real, sustainable strategies for TRID compliance going forward.
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