nce upon a time, Mr. and Mrs. Homebuyer went to their trusted Loan Consultant to be preapproved for a new home purchase. They knew their Loan Consultant, Jane, very well, and had worked with her the past a couple of times. She had always done her very best to ensure they were properly qualified, their loan terms were as promised, and she kept them informed throughout each step of the process. In fact, they liked her work ethic so much that they had also been comfortable in referring her to their family, and friends.
Jane evaluated all their documentation and gave them information on a couple of different products that suited their goals. They left her office and began in earnest to look for their new dream home. It was only a week or so later when they found that perfect property, and along with the letter Jane sent over for them, they submitted an offer. It must have been that the stars were aligned that day as their offer was accepted, and they were moving forward towards their new dream home purchase.
Imagine at this point how wonderful they felt when Jane sat them down again and explained the new guidelines that had been introduced called TRID that required certain rules to be adhered to, and certain waiting periods to be implemented during the process that would inevitably slow down the buying process. But, that this was in their best interests as they would have more time to digest the information overload during the buying process, and underwriting of their loan.
Satisfied that Jane had always been so quick and thorough in the past, they left the office and began the task of gathering the rest of the documents she needed in order to expedite the loan to underwriting. Meanwhile, Jane was requesting the fees from the escrow/title company, for the appraisal, the HOA, and from her lender. She received the fee sheet completed from escrow/title, and inputted all the data into her Loan Estimate, the wonderful new disclosure that had recently replaced the old Good Faith Estimate. Once complete she dutifully emailed out a secure set of Initial Disclosures for Mr. and Mrs. Homebuyer to sign and acknowledge.
The loan was submitted to underwriting, approved, conditions were received and signed off, the appraisal was ordered and completed, the loan was locked in, and everything was running along very smoothly. When it came time to issue the Initial Closing Disclosure, fees were requested once more from escrow/title, and it was discovered that they had errored in the original quote for their escrow fee, and missed another fee off entirely. This was simple human error, not malicious intent to bait and switch the fees, and the difference was negligible in the grand scheme of things. In fact, the large lender credit that Jane had secured for Mr. and Mrs. Homebuyer with the locked in rate more than covered any additional sum of money.
Imagine the absolute horror, and heart rending disappointment that Mr. and Mrs. Homebuyer felt when they were told that due to the fact there are no allowances for errors for these particular fees to be changed at this stage in the process, they had to stop the transaction, close it out, and the start all over from scratch with new initial disclosures! By this time they had given notice at their current residence, and were avidly packing their belongings in anticipation of moving in about 10 days.
The seller was livid, the agents were incredulous, and the buyers were devastated. Subsequently the seller decided not to extend the contract past the original close of escrow date, even though it was their choice of title/escrow company who had made the unfortunate error that caused the transaction to fail. Mr. and Mrs. Homebuyer lost their dream home, and are now avidly searching for another rental property to move into as they are officially homeless given that their current landlord has already re-rented to new tenants.
This sounds incredible, but it really is exactly how this new process could play out, and has done so I hear from numerous sources. And, this is but one unfortunate scenario among a multitude of possibilities than can cause a hard stop, and a complete re-origination of the loan transaction.
Please tell me, how is this in the borrowers’ best interests? In any way, shape or form, how can this truly be ensuring they are fully informed and therefore making educated decisions on their new purchase if there is zero margin for human error, and none of their informed choices make any difference? Where on Earth were the educated, and informed consultants used to assist in the development of the TRID guidelines that brought us to this? The new Loan Estimate and Closing Disclosure held so much promise of better times, and easier comprehension of mortgage fees and closing costs. It has to be said that these once promising forms have become part of an epic failure.
Suzanna Ravin has been working in the lending industry for the last twelve years, currently managing a retail branch Peak Mortgage, a division of Finance of America Mortgage, LLC. She maintains her top originator status by remaining very hands-on with her clients’ transactions. Often referred to as the Loan Guru, she loves to be completely informed on lending guidelines, and regulations.