What Does TRID Mean For Realtors?

 

On October 3, 2015, the TILA-RESPA Integrated Disclosure, or TRID, will go into effect. It is commonly known as the “Know Before You Owe” rule. TRID is designed to make sure all mortgage lenders’ disclosures are clear, correct, and easy for buyers to understand. Buyers will also have more time to review disclosures and ensure that they understand what is on the forms. TRID brings many changes, the most prevalent changes being new forms, a different time table, and a change in the definition of a Loan Application. Roles of settlement agents, title, and lenders will also change. TRID will become the new mortgage standard, as it is mandated by the Consumer Financial Protection Bureau (CFPB). Our goal is to support our valued Real Estate partners to ensure everyone is on the same page for efficient closings.

There will be two new forms under TRID: the Loan Estimate (LE) and the Closing Disclosure (CD). The new forms will clearly and concisely detail the loan details such as: cost, risks, if any terms can change after closing, and if there is an early payment penalty. Both forms are designed to work together. According to a study ran by the CFPB the new forms helped participants provide more accurate information. The testing also found information that did not improve buyer understanding; it was subsequently removed. Correct information minimizes the need to re-issue disclosures; this is especially beneficial because of the new timelines.

The Loan Estimate (LE) will replace the Good Faith Estimate (GFE) and initial Truth-in-Lending Disclosure (TIL). The LE is specifically designed to make sure the costs and risks are clear and easy to understand. Similar to the previous disclosure rules, your clients will receive the LE within 3 business days of submitting a loan application. An application is considered received when these six items are received: name, income, social security number, property address, estimated value of the property, and mortgage loan amount sought. A borrower then has up to 10 days to proceed with the loan or not. After 10 days the LE will expire. An LE business day is defined as each day a creditor’s office is open to the public for carrying out all of its business functions. In our case, Monday-Friday, with the exception of holidays. The LE will be 3 pages long and will cover 9 sections. Page 1 will have the general information, loan terms, projected payments, and costs at closing. Page 2 will have the loan costs, other costs, and the calculation of cash to close. Page 3 will have other considerations, and the confirmation receipt. There will now be a minimum wait of 7 days between the LE and Closing. Under TRID, if there are any changes in circumstances the disclosures must be re-issued and re-signed. The LE is just an estimate of the total costs, not the final costs. Click here to view a sample of the LE form.

The Closing Disclosure (CD) will combine the previous HUD-1 and the final Truth-in-Lending Disclosures. Previously, escrow was responsible for the final HUD-1, under TRID the Lender will have to create the CD.   The CD contains all of the actual final costs of the loan. The form is designed to be easy to compare to the LE to see how the actual costs compare to the estimated cost of the loan. Page 1 of the LE and CD will match. Unlike the previous HUD-1, your clients must receive the CD at least 3 days before signing. A business day defined under the CD includes all calendar days except Sundays and legal public holidays. If changes to the CD result in an increase to the APR of more than 1/8^th of a point, a prepayment penalty is added, or the loan product has changed, then an additional 3 day waiting period is added. The final CD must represent all of the actual costs to the buyer including costs that changed at the closing table. If there are any changes in the loan cost within 30 calendar days of signing documents, a revised CD must be delivered within 30 days of the change. Click here to view a sample of the CD form.

While many anticipate TRID will slightly change the loan process as we know it today, many lenders, including Mountain West Financial, have been making preparations to ensure our policies and procedures meet the expectations set by the CFPB and are as simple and efficient as possible to ensure timeframes are not impacted. So, what does this mean for you as a realtor? The process for your clients will be more transparent. The primary objective of TRID is to help homebuyers understand the cost of their loan before and during the home loan process. We look forward to working with our borrowers, realtors, and other affiliates to make the transition seamless and continue our mission of making homeownership a reality!

 

 

 

 

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.