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01/07/2016

TRID Q&A: How to Handle Walkthrough Changes

Question: How do we address issues that come up during a walkthrough? For example, if the water heater is leaking and the parties want to escrow $1,000 for it to be repaired. Does the Closing Disclosure have to be revised and does the lender need to redisclose?

Answer: Prior to the consummation or closing, the Closing Disclosure should be updated with the best information reasonably available to the lender. If any issues arise from a walkthrough that require a monetary adjustment, the Closing Disclosure should be updated to reflect this adjustment prior to closing.

Although the walkthrough may necessitate a revised copy of the Closing Disclosure, the changes may not necessitate an additional three-day waiting period between delivery of the Closing Disclosure and closing. There are only three circumstances (§ 1026.19(f)(ii)) that trigger a new three-day waiting period:

  1. when the disclosed annual percentage rate becomes inaccurate
  2. when the loan product is change
  3. when a prepayment penalty is added.

This is why it is important to work with real estate partners to ensure those adjustments are sent to the lender and settlement agent as soon as possible after they come to light. While the change may not trigger a new three-day period, lenders may require a few hours to approve the change, determine its impact on the APR and update the disclosures.

Comments

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Some food for thought....there are UW and other important concerns a lender will need to focus on that should really take precedence over the revision of the CD - who is paying for the escrow, if it's the borrower, do they have sufficient funds? How does the leak (or any other deficiency)affect the livability/marketability of the property and if not fixed immediately what other damage will the leaking water cause to the surrounding floor covering, drywall, maybe an escrow is not the answer..... who is going to manage the escrowed funds and final inspection to ensure the repair is completed in a timely and workmanlike manner?? Final walkthrough issues are not new to TRID and once the above items are addressed, then the lender can proceed and handle the issue no differently than they were handled pre-TRID.

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