TRID stands for TILA (Truth in Lending Act)-RESPA (Real Estate Settlement Procedures Act) Integrated Disclosure Rule. Despite having such a convoluted name, the measure’s espoused aims are pretty simple: to improve the transparency and clarity of the mortgage processes, with respect to the consumer. It’s been in the works for a while, and its scheduled date of institution (August of this year) was pushed back to this month. As of October 1, 2015 there are a few important changes to mortgage process, mostly in the form of new paperwork and new time constraints. We’ll break down what to expect.
- The new Loan Estimate form consolidates the Good Faith Estimate and the Truth in Lending Disclosure forms into a shorter, “easier-to-understand” text.
- A check on lender fees. Lenders can’t impose any fee on a consumer until said consumer receives a loan estimate and indicates an intent to proceed. The only fee a lender can impose is a “reasonable” fee for gathering a potential buyer’s credit information.
- ○ This makes it easier for buyers to shop around and gives them a better grasp of interest rates. Consequently, it takes lenders longer to pre-approve prospective buyers.
- The new Closing Disclosure form consolidates the Truth-in-Lending statement and the HUD-1 settlement statement into one shorter text, and disseminates the information therein with language that is easier for a buyer to understand. It also requires a detailed account of the whole real estate transaction, including closing costs and other fees and loan terms. The goal is to make the experience at the “closing table” easier to manage, especially for first-time buyers.
- Now that the lender is giving out more information ahead of time, both s/he and the title company may have to adjust their roles and normal ways of doing things.
- Disclosures must be provided within a specific time frame.
- Lenders must make the Loan Estimate Form available to the consumer within three business days of the consumer’s loan application–three days after the consumer provides Social Security #, property value estimates, etc.
- The buyer must get a Closing Disclosure Form three business days before the loan is consummated and s/he has contractual obligations to the mortgage.
- Any significant term changes (changes in the loan product, the addition of a prepayment penalty, or increases in the APR) will start a new waiting period of three days.
- Both of the aforementioned forms can be delivered in person or electronically.
The TRID’s new rules are not retroactive–they only apply to applications received after October 1. It’s important to stay sharp and review procedures to make sure you’re staying within its guidelines. The National Association of Realtors contends that if even 1 out of 100 closing transactions experience TRID-related issues, it’ll amount to about 4,000 botched transactions in a month alone! The new legislation will make lenders extra careful when providing mortgages, and it will likely result in extended mortgage times and delayed closing dates. It’s essential that the new forms are accurate and carefully evaluated, if you want to ensure that the mortgage process is carried out smoothly and your settlement occurs on time. Last minute negotiations may impact the three day rule and delay closing, so make sure that everything is in order with all parties far in advance of the scheduled settlement date! If you have any questions or concerns, feel free to contact us!