Brokers Want Say in Review of Closing Disclosure
The National Association of Realtors reports that a recent survey of its members has found that because of the new TRID regulations, brokers and agents are not being given an opportunity to review Closing Disclosures (“CDs”) prior to closing. As a result, the NAR says brokers and agents are not able to provide valuable input into the preparation of CDs and closings are being unnecessarily delayed and, in many cases, cancelled.
TRID and consumer privacy regulations provide that CDs may only be provided to the Buyer unless the Buyer consents to third party release. A Buyer’s CD can’t be shared even with the Seller as the document is not two-sided like a traditional HUD-1. Closing software therefore creates a Seller’s statement for the Seller to sign at closing. However, there is not one “closing statement” that shows the true transaction like a HUD-1 any more and the documentation is clunky. Agents for both the Buyer and Seller used to review the HUD-1 prior to closing and could often detect issues that the closing agent may have missed. Now, the final CD is prepared by the Lender who is often out of state and unfamiliar with local practices and fees and unaware of many deal terms. At the time the loan is approved and assigned to the closing agent, the closing agent is asked to prepare a “preliminary” CD from which the Lender will prepare the final CD. But at that time, most everything the closing agent knows is guess work and files are incomplete. The incomplete information is often transferred to what is presented as the final CD.
CFPB’s privacy concerns are valid, but misplaced. Once again, the intent to protect the consumer through disclosure has overly complicated the matter. The CD, intended to replace the Truth In Lending and Good Faith Estimate documents should not have also replaced the HUD-1. The HUD-1 was a simple document which explained and disclosed receipt and disbursement of funds. The CD attempts to do too much and doesn’t do any of it well. Until this issue is re-visited, Lenders and closing agents will have to creative in explaining to Buyers and Sellers how transactions will fund.