TRID: Adding Time and Costs

The first effects of the new Know Before You Owe or TILA RESPA Integrated Documentation (TRID) rules are now measurable. The changes created some confusion among lenders and closing agents and the average time-to-close has risen as a result. The industry is at the short end of the learning curve, so this impact will likely ease with time.

The new TRID rules have been in effect since October 3^rd. Historically, a typical close took roughly 30 days so few closings in October would reflect the new TRID process. However, with November complete we can begin to measure the impact.

A special data sample was utilized to create a time series for time-to-close; the time in days from when a listing goes under contract until it is complete. A primary driver of time-to-close is the volume of mortgage applications, both refinances and purchases. Both series are charted below in 4-week moving averages to mute the weekly volatility.

Here are some of the principal takeaways:

• Applications volume typically falls in November
• In 2013 and 2014, time-to-close fell with applications volume
• Applications volume fell in November of this year, while time-to-close spiked
• There was a bulge of applications in August through October, but these should have been worked out by November and they did not impact earlier timelines
• Time-to-close rose to an average of 40.5 days in November of 2015 from 35.9 in November of 2014, a 12.8% increase.
• Time-to-close peaked at 41.2 days in the 4^th week of November

While early indications are that TRID has delayed some closings, anecdotal evidence suggests that sales are still likely to close. Consequently, the impact to home sales volume and statistics should be transitory. The change will cause a one-period shift in sales to the next month and each subsequent month will have a full month’s tally of sales. As time-to-close declines, there may be a modest increase to monthly sales as the market catches up. This shift may modestly impact the seasonal factors used to adjust economic time series of home sales.

In the long-term, lenders and closing agents may adjust to the new environment reducing the time-to-close. In the near term, consumers are likely to require a 45-day lock period rather than the standard 30-day. This could add $100 to $300 onto the cost of closing.