On October 3, 2015, the TILA RESPA Integrated Disclosure or TRID (everyone refers to this as TRID, which rhymes with “kid”) goes into effect. It changes the way mortgage loans are disclosed (so long Good Faith Estimate) and how mortgage loans close (good-bye HUD-1 Settlement Statement). TRID is the latest (but likely not the last) mandate by the Consumer Financial Protection Bureau (CFPB, the Dodd-Frank spawned agency) to protect consumers in financial transactions, including mortgage.
My hope with this brief message, is to explain simply how TRID works and give some guidance on how things will go with your next mortgage transaction. Before I do that, you should know that TRID won’t change interest rates (the usual factors affecting rates will still apply), fees (if anything, fees mayt be lower under TRID), customer service and who you choose as your mortgage lender. TRID is an alphabet soup of changes – now more than ever you need a professional loan officer who works for a company that understands the rules and knows how to timely deliver your mortgage.
Two Important New Documents
Loan Estimate (LE) – in a sensation of paperwork reduction, the LE combines the old Good Faith Estimate (GFE), Truth-In-Lending (TIL), and the servicing disclosure (this told you whether your loan could be sold). The LE uses large print and simple language to set forth loan terms and the costs associated with getting a mortgage. It is arranged in a way that makes it easy to understand at a glance the loan amount, rate, principal and interest payment, and the progression of the loan over time. After reviewing this document, the borrower must indicate an intent to proceed with the loan – this can be done by telephone, email, or in writing (by mail or other delivery).
Closing Disclosure (CD) – Say good-bye to the TIL disclosure (a document related to the old TIL), the Itemization of Amount Financed (a document that always looked like someone who wandered into the wrong party), and the HUD-1 Settlement Statement. The CD combines all three into one, easy to read, document that is a mirror of the LE. The goal of CFPB is developing the LE was to allow borrowers to be able to compare what they were told they were paying to obtain a mortgage (LE) to what they are actually paying (CD) at the table.
These two documents, once implemented and understood, should go a long way toward simplifying the lending process and helping consumers (the goal of the CFPB) understand the terms and costs of the loans they are obtaining.
Timing is Critical with the LE and CD
The new forms are not the only TRID changes. TRID imposes specific waiting periods that must be observed before certain parts of the transaction may proceed. Within 3 days of a borrower providing 6 basic pieces of information to a loan officer, the lender must provide the LE. The LE itemizes the costs of the transaction for the borrower and, barring any significant change in the loan, these costs will not change throughout the transaction. Also, the LE must be delivered to the borrower a minimum of 7 days prior to closing. If changes are made and a revised LE is needed, the new LE must be received by the borrower 4 business days prior to closing. Finally, on this topic, the Closing Disclosure (CD) must be delivered to the borrower 3 business days prior to closing. Contrast this with HUD-1 Settlement Statements that were sometimes prepared mere hours prior to the parties sitting at the table to close.
Now More Than Ever
TRID represents a significant change for the mortgage industry. Now more than ever, it is critical to work with a mortgage professional who understands the process and who can get you from application to closing. The CFPB encourages you to do your homework before you buy a home or take on a new loan and has posted an informative 28 page booklet on its website. Please let me know if I can be of assistance if you are buying a new home or refinancing your existing mortgage.