In October 2015, the Consumer Financial Protection Bureau (CFPB) made sweeping changes to how the mortgage disclosure process is handled through the implementation of the TILA-RESPA Integrated Disclosure Rule (TRID). Their goal was to provide buyers with more transparency to fully understand the charges associated for a particular mortgage loan and give them time to decide if they can afford it.
What is the TRID Rule?
TRID is the TILA (Truth-in-Lending Act) and RESPA (Real Estate Settlement Providers Act) Integrated Disclosure Rule. It integrates 4 existing required disclosures: the initial TIL (Truth-in-Lending), GFE (Good Faith Estimate), final TIL, and HUD-1 and combines them into 2: the LE (Loan Estimate) and the CD (Closing Disclosure).
What is the purpose of TRID?
The Consumer Financial Protection Bureau (CFPB) implemented TRID to add transparency to the lending process to that the consumer may fully understand the charges of their loan in order to decide whether they believe they can afford the loan or not. The new TRID forms use clear language designed to make it easier for consumers to locate key information such as the interest rate, monthly payments and costs to close.
Does TRID apply to all loans?
TRID applies to most closed-end consumer mortgages, including Construction-only loans and loans secured by vacant land or by more than 25 acres. However, it does not apply to HELOCS, Reverse Mortgages, mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e. land). There is a partial exemption for certain transactions associated with housing assistance loan programs.
The Loan Estimate (LE)
The LE must be provided to the consumer no later than 3 business days after receipt of a loan application and no later than 7 Federal business days before consummation (closing/disbursement of funds). Federal Business Days are defined as all calendar days except Sundays and legal public holidays. The LE explains the important details about a mortgage loan including but not limited to the estimated interest rate, monthly payment and total losing costs for the loan.
The Closing Disclosure (CD)
The lender is responsible for issuing the CD to the consumer once receiving the final closing figures from the title company and/or the seller’s attorney reflecting all title and seller charges 3 days prior to consummation. The CD reflects final details about the mortgage such as loan terms, projected monthly payments and total closing costs.