It’s closing day. The buyer, the seller, their realtors, the lender and the closing attorney are all gathered around the table. Settlement statements that include both buyer’s and seller’s information are distributed. Papers are quickly shuffled between parties as the attorney gives the summarized version of each page. Each party signs on the appropriate dotted line. Copies are made and distributed to everyone present. The transaction is complete and everyone leaves happy.
That was before October 3, 2015.
Then along comes the TILA-RESPA Integrated Disclosure Rule (TRID).
Now, questions arise such as “Can the realtors be at the closing table”, “Who can have copies of the closing disclosure documents” and “What information is considered NPI (non-public personal information)?”
TILA-RESPA Integrated Disclosure Rule (TRID)
The Consumer Financial Protection Bureau (CFPB) released the TRID rule (TILA-RESPA Integrated Disclosure Rule) which is a combined version of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).
The over-arching purpose of TRID is to protect consumer privacy, and make it easier for the parties to wade through everything they are signing at the closing of real estate transactions. To accomplish this end-goal, what was once a single disclosure with both buyer and seller information has been broken up into two different “Closing Disclosure” forms, one with buyer information and one with seller information. Buyers must now receive the Closing Disclosure three days prior to the closing date. Certain changes to the disclosure require an additional three day waiting period before closing the transaction.
Privacy rules have not actually changed, but the rules have created uncertainty at the closing table about who can receive copies of Closing Disclosure forms, especially among realtors and lenders. That uncertainty stems from the requirement to protect consumers’ NPI. That information is widely defined and includes, but is not limited to, social security number, bank account numbers, address, financial information and loan numbers. You can easily see how this limits the sharable information since all of those items are included on some form or another in the closing documents.
The TRID regulations have brought up the need for realtors and lenders to review their privacy policies in regards to real estate closing transactions. There are no hard policies to follow. Individual companies have to audit their own policies in light of the TRID regulations to be sure they are properly protecting consumer privacy.
What does it mean for…
The new TRID regulations make the realtor’s job a bit more complicated. In order for realtors to close Multiple Listing Service (MLS) listings, they have to report certain data fields to MLS after a closing. In the past, realtors would use copies of the Settlement Statement to get the necessary information to close out the MLS listing.
Now, however, lenders and closing attorneys are wary of giving the documents to realtors. As those documents contain NPI that is now restricted by TRID, realtors don’t have the easy access to them that they previously had. Since lenders have started refusing to share the documents with realtors, realtors have had to request the information directly from the buyer. One can see how this would be slightly uncomfortable for the realtor, especially if the buyer refuses.
As an option, to avoid the above awkward denial of records access, realtors can encourage the use of ALTA settlement statements. American Land Title Association (ALTA) has developed standardized settlement statements that do not include NPI, and can be used in conjunction with new TRID closing disclosure forms to itemize all financial information for both the buyer and seller. These forms CANNOT be used in place of the new Closing Disclosures. However, realtors can encourage the lender and closing attorney to use them so that the realtor can walk away with the data necessary to close out the MLS listing.
For realtors, open communication with the lender and closing attorney may better enable the realtor to leave the table with what he needs to close the listing.
Lenders are most affected by TRID in three ways: they must provide separate closing disclosure documents, they must provide full Closing Disclosure forms to the buyer three days prior to closing, and they have to alter their privacy policies to ensure they are not sharing consumer NPI with anyone.
Having to prepare the separate documents and submit to the buyer three days in advance of the closing can certainly be a nuisance as lenders must alter the process that had been used for so long. It also creates a bit more paperwork, which slows the process, which in turn can cause frustration for all parties involved.
But the bigger adjustment may be the change in privacy policies to conform to the new rules. As previously mentioned, there are no legal changes to privacy legislation. However, individual businesses need to ensure that their own privacy policies do not violate the new standards for protecting consumer NPI.
An option for lenders to consider is the ALTA settlement statements. These documents can make it easier to share financial transaction information between parties involved, but without sharing any consumer NPI. By using the statements, lenders keep elements of the old process in place when it comes to sharing the closing disclosures, while still following the new TRID guidelines. Again, it’s a bit more paperwork, but it could ease some of the confusion at the table about what information can or cannot be shared amongst the parties involved.
The lender can smooth the transition to follow the new guidelines by auditing their privacy policies and ensuring the policies are communicated to all parties in advance of the closing.
Following the rules, because consumers know them too.
The worst thing that can happen at the closing table is a battle over who gets what pieces of paper, or the buyer leaving without understanding exactly what he signed. Consumers want to sit down, sign and leave knowing that their private information is protected and that no last-minute “trickery” with the numbers happened. Realtors want to sit down, observe and leave with the information necessary to finish their work on the sale. The lenders want all of their papers accurate and signed, as do the settlement agents. And everyone wants this done as quickly as possible.
To ensure the goals of each party are met within the constraints of the new TRID rules, it is imperative that realtors and lenders know and understand the new guidelines. Thanks to the Internet, consumers have the opportunity to learn as much about the TRID guidelines as those within the industry. Throughout the entire process, they will be fact-checking what they are told to maintain control of the transaction. As the ones guiding them through the process, realtors and lenders must be able to guarantee the buyer that their privacy is protected at all times.
So does it, or doesn’t it?
What TRID does clarify is that NPI cannot be shared, which is why there are now different closing disclosures for the buyer and seller. That part is easy to define and follow as there are forms to use.
What TRID doesn’t clarify is how, or how not, to share those documents amongst the parties involved. That is up to the individual business to interpret, while ensuring protection of the consumer’s private information at all times.