Our last newsletter discussed the new US Consumer Financial Protection Bureau (CFPB) rules affecting mortgages as of October 3, 2015. This month, we will look at transactions not covered by TRID, which include real estate commercial deals, cash deals and private mortgages. Because of the exceptions, these transactions may be able to be streamlined and close more quickly and simply.
In a rush to comply with the new rules, these exceptions have been overlooked. Because title companies are applying the TRID rules to all transactions, these exception deals are potentially being made more complicated and taking longer to close than necessary. This is causing some concern with attorneys and others involved since all closers are currently set up to comply with the new rules; and therefore, are not able to streamline for excepted transactions.
Realtors should be aware that for commercial and cash transactions, the old rules apply. In addition, contracts for private mortgages and those where the seller is providing the financing also have different contract terms.
For cash and commercial deals, as well as those covered by private mortgages, the following holds true:
1. Real estate contracts The TRID regulations require that a mortgage company have all the necessary documents and costs submitted at least three days before closing or closing must be rescheduled. This is not true for excepted transactions and other contract terms will apply. Realtors should know that real estate contracts may be breached if the closing is delayed due to the mortgage company following the TRID regulations which do not apply and are likely to be different than the terms of the commercial, cash or private mortgage deals. Realtors and other parties involved should not rely on the mortgage company for extension or rescheduling of the closing.
2. Private Mortgages It is obvious that for cash transactions, we do not have to be concerned with mortgage provisions. With private mortgages, the mortgagee is not required to provide loan estimates and therefore would not enable a purchaser to begin shopping for the best rate. It is a negotiated rate between the parties. Further, there is no requirement that the purchaser be supplied with a breakdown of the mortgage, including the mechanics of the loan, interest rate, annual percentage rate, monthly principle, interest payments, property tax, insurance or other escrow items. These are all items negotiated between the parties under the contract.
3. Loan Estimates In the event a loan estimate is issued, it can be changed at any time up to the time of closing. This enables adjustments to be made after the walk through and home inspection and therefore would facilitate the closing date accordingly.
4. Negotiated Terms In the excepted transactions, purchasers have already negotiated the terms of the mortgage, which can be changed at any time by mutual consent. It is equally important that both sides be represented since the current rules on closings do not protect either side.
As indicated above, with commercial and cash deals, as well as those with private mortgages, the rush to comply with the new rules has muddied the waters. Therefore, for these transactions, it is more important for the parties to have the benefit of legal advice from the beginning of the process through the end. Buyers and Sellers will benefit from this guidance regarding the current state law, as well as the Court Rulings relating to buying and selling property.
Posternock Apell, PC is here to assist buyers and sellers with their real estate concerns in cash deals, commercial deals, land use issues, private mortgages and other complex transactions. Our firm has extensive experience in handling all of the above excepted areas of real estate transactions.
If you are buying or selling residential or commercial property anywhere in New Jersey, including Cherry Hill, Moorestown, Maple Shade, Mt.Laurel or Browns Mills, it is in your best interests to speak with a qualified real estate attorney. The Posternock Apell, PC team is dedicated to protecting the rights and financial interests of clients. Contact us today.