TRID (TILA-RESPA Integrated Disclosure) New Regulations Coming October 1st
The Consumer Finance Protection Bureau (CFPB) has issued the new TILA-RESPA Integrated Mortgage Disclosure rule (also known as TRID), beginning October 1, 2015.
To provide you with a bit of background, the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) are in place to protect homebuyers from fee abuses, and the CFPB – created in July 2011 – is responsible for enforcing them.
The TILA-RESPA Integrated Disclosure aims to make mortgage disclosures simpler by combining TILA and RESPA into two forms. While the paperwork is expected to become simpler and easier to understand, the overall process may become slower than it was before.
If you are planning on purchasing a home on or after October 1, here’s what you need to know about the new regulation.
Amendments To The Paperwork
Up until now, the law has required borrowers to fill out two disclosure forms when applying for a mortgage. Likewise, two forms needed to be completed upon (or before) the closing of the loan.
The CFPB believes that the information provided on these forms is inconsistent and hard to understand. In general, borrowers find it confusing, and lenders find it cumbersome.
Under the new regulation, the Truth-in-Lending form and the HUD-1 form will be merged to create The Closing Disclosure, an integrated five-page form. The Closing Disclosure will only be given to the buyer.
However, the buyer and the seller will both be responsible for signing a Settlement Statement. Since the HUD-1 was difficult to understand (if not impossible), one can only hope that the redesign will allow for more clarity, though it’s still hard to say whether it will or not at this stage in time.
Homebuyers can expect to see more transparency with regards to the accurate disclosure of any and all applicable fees. Upon receipt of the borrower’s application, lenders will be required to disclose these amounts.
This should also make it easier for borrowers to contrast and compare estimates between lenders, as the fees will be categorized and alphabetized. Reading and interpreting the estimates should therefore be much easier to do.
A Loan Estimate (or LE) expires after 10 days, but the buyer is not obligated to move forward with the transaction. If you decide to proceed, however, then the fees are locked in.
The Mortgage Process
Under the new rules, lenders must give borrowers three days to review the Closing Disclosure, at least three days before closing. Closing would then occur after the review period. If any changes need to be made to the closing date, the interest rate or other terms, the closing must be pushed back seven days.
Homebuyers should be prepared for a three-day delay for closing. This is subject to change based on the terms of the lender and their specific processes, but under the new regulation the three day period appears to be fixed.
How To Avoid Delays
Generally speaking, the new TRID regulation is to the buyer’s advantage. Increased transparency, clarity, and security should allow for a smoother, more pleasant mortgage application process. Moreover, there should be a lot less confusion pertaining to fees.
However, there are factors that could affect timelines for closing. Buyers should prepare by ensuring their financials are in order. In addition, if your lender or title requires any documentation from you, be ready to provide them with what they need as early as possible.
By taking these precautions, you can avoid possible delays in closing.
There is still considerable confusion regarding the upcoming changes. At this moment in time, it’s hard to say what effect TRID will have on lenders and buyers alike.
Ultimately, however, buyers should find the application process much simpler. The terms should be much clearer. TRID should bring about positive changes for consumers.