This guide covers what is TRID and how TRID changed the mortgage industry. What Is TRID? Many consumers still ask What Is TRID and are not quite clear with this four letter word. In order to make loan disclosures simpler and more easy to understand, the Dodd-Frank Act directed the Consumer Financial Protection Bureau (CFPB) integrate all TILA and RESPA mortgage disclosures. It was integrated under the TILA- RESPA Integrated Disclosures (TRID) rule. This is also referred to as “Know Before You Owe.” In this article, we will cover and discuss what is TRID.
Know Before You Owe
All home loans originated after October 3, 2015, are subject to “Know Before You Owe,” which can be broken down into three elements to assist consumers:
- Disclosures
- Timing
- Electronic Loan Process
What Is TRID: The Three Elements Of TRID Explained
Disclosures: Consumers can now breathe easier, as they will only receive two disclosures, rather than the previous four.
- The new forms are more straightforward
- It was easier to understand
- Has the same format for easier comparison
- Prior to October 3rd, consumers received an Initial Truth-in-Lending and Good Faith Estimate at the beginning of the process, which has been replaced by the Loan Estimate
- And, at the end of the process, the consumer received a Final Truth-in-Lending and HUD-1 Settlement Statement, subsequently replaced by the Closing Disclosure
- The four previous forms all had different formats and were difficult to read and understand
The simplification and standardization of these forms are a very positive change for consumers. Here are some commonly asked questions related to TRID and its influence on the mortgage process:
TRID Frequently Asked Questions and What Affects it Has on the Mortgage Process
What Does TRID Stand For?
TRID is short for TILA-RESPA integrated disclosure, implemented by the Consumer Financial Protection Bureau (CFPB) in October 2015. TILA and RESPA integrated four other disclosures into two documents:
- Loan Estimate (LE)
- Closing Disclosure (CD)
These Loan Estimate and Closing Disclosure documents give mortgage borrowers in-depth information about the associated risks, costs, and terms of the loan, providing more transparency.
What Are the Purposes of TILA RESPA?
TILA RESPA Aims To:
- Provide an Easily Understandable Mortgage Disclosure System For Homebuyers.
- Improve accuracy around the understanding of loan terms as well as accurate expectations during the closing process.
- Minimize the number of surprises and undisclosed fees while signing important documents.
Enable enabling technologies that construct dramatically improved decision-making capabilities by forging looking glass-like documents that present information well in advance.
In What Way Will RESPA TILA Change The Process of Acquiring a Mortgage?
With TRID, There is a Vast Range of Modifications That Can Be Observed:
- Loan Estimate (LE): This document is issued to the borrower less than three business days after applying for a mortgage. It is a great resource as it provides information about the loan’s estimated monthly cost, terms, and required cost during its closing.
- Closing Disclosure (CD): Lenders must provide this document three business days in advance, detailing the specific terms of the loan and costs associated with its closing. This gives the users adequate time to review it.
- Waiting Periods: TRID establishes compulsory waiting periods between the various disclosures and the closing of a loan to promote an understanding of the loan terms.
- Restrictions on Cost Increases: Restricting certain cost increases after the Loan Estimate goes out promotes cost-common-sensing adherence.
What is included in the Loan Estimate (LE)?
It contains:
- Details regarding the loan include the principal amount, interest rate, and duration.
- Estimation of the monthly payment practitioners would have to make for taxes, principal, insurance, and interests.
- Estimation of the required closing costs and cash needed to close it.
- Important components include adjustable rates and penalties for payment foreclosing.
What is Included in The Closing Disclosure (CD)?
The Closing Disclosure CD comprises the following:
A range of details and terms relating to the closing of the loan, such as the asset, maximum interest rate, and loan amount, are included.
- A detailed explanation of costs incurred upon achieving closure.
- A comprehensive payment schedule that further details taxes and insurance.
In case the closure involved multiple loans, information regarding how rates would increase is also added.
Who is Responsible for Complying With TRID Rules?
- Credible and lenders: References to accurate work and to work prepared in time for writing the loan estimate and the closing disclosure.
- Settlement Agents: Directly aid in compiling relevant documents and signing the closing settlement on the loan attachment.
- Borrower: Please examine all documents completely and ask about anything you do not understand.
What is The Benefit of TRID for a Borrower? TRID Focuses on Protecting The Borrower By:
- Illustrating the characteristics and costs associated with the loan more broadly.
- Reducing the possibility of any undisclosed charges or costs at closing.
- Giving the borrower enough time to check the details of the loan being applied for.
Are There Any Exceptions to TRID Principles and Rules?
TRID guidelines apply to all mortgage loans with few exceptions. HELOCs, reverse mortgages, any loan secured by a mobile home, a dwelling not fixed to the land, and business-purpose loans are excluded from TRID.
What Will Happen if The Lender Violates The TRID Rules?
Lenders who violate TRID provisions suffer penalties in the form of fines and/or imprisonment. Borrowers, too, are entitled to dispute the terms of the loan or seek alternative remedies if they suffer losses because of non-adherence.
How Can Borrowers Ensure That They Follow TRID When Getting a Mortgage?
Keep Documents Together:
- All required papers and documents should be submitted on time so that the process is not delayed.
- Read the documents carefully.
- Check for any differences between the Loan Estimate and Closing Disclosure, as both should agree.
Make Inquiries: Get clarification from the lender or other settlement agent on terms that appear vague or at no cost.
Be Ready: TRID waiting times must be factored in early.
- TRID enables the loaning process to be more transparent and fair.
- This encourages borrowers to make informed loan decisions without feeling anxious.
- Furthermore, if borrowers understand its requirements, they can go through the mortgage process more efficiently.
Does TRID Delay Mortgage Closings
Timing:
- The new rules regarding the delivery times of the disclosures are one area that the lending and real estate communities fear
- This is because it may cause delays for consumers
- The new timelines for delivery of disclosures are strictly outlined and enforced by the CFPB
- The Loan Estimate must be delivered to the consumer three business days after a completed application is submitted
- This is the same as the old rule with the Good Faith Estimate
- Along with the Loan Estimate, the lender will send an Intent to Proceed form
- Lenders may not begin the process of requiring processing documentation or ordering an appraisal until the consumer signs, acknowledges and returns the Intent to Proceed
- If at any time during the process there are changes to any loan terms, such as loan amount, loan program or locking in an interest rate, a revised Loan Estimate must be delivered
- And loan consummation may not occur less than four business days from delivery
- Which puts a burden on the consumer to make all final decisions well in advance of loan consummation
- Prior to loan consummation, the consumer now has ample time to review and understand the terms of their loan
- This holds true because Closing Disclosure must be delivered to the consumer no less than three business days prior to loan consummation
At this point in the process, it’s incumbent on all of the involved parties, consumers, real estate agents, settlement agents, and lenders to work closely together to ensure there are no delays.
Electronic Loan Process
Electronic Loan Process:
- To satisfy the disclosure timing rules and closing deadlines, many lenders have adopted a fully electronic loan process
- This includes online applications, secure document portals, email delivery, and electronic signatures
- Nearly a week can be saved if not using the slow back and forth of the U.S. Postal Service
- Modern technology in the mortgage industry has changed the process for the better and is huge money- and time-saving benefit for consumers.
The team at Gustan Cho Associates love what we do; making the dream of home ownership become a reality. Most of our licensed experienced loan officers write informative blogs about mortgage lending and real estate. The team at Gustan Cho Associates believe that education is the key in having every home buyer informed and educated in making the most important decision of their lifetime; a home purchase. The average loan officer at Gustan Cho Associates has been with the team for an average of ten years. Each loan officer at GCA Mortgage Group are experts in all loan programs from government and conventional loans to non-prime mortgage loan programs. The team at Gustan Cho Associates feel that education is key in being a great manager so he is always up to date with the latest mortgage rules and changes. Gustan Cho Associates makes sure that all of its loan officers and support staff are educated and have the latest updates on all mortgage lending guidelines. The team at Gustan Cho Associates is not just available to his borrowers 7 days a week, but also to his staff and colleagues
Borrowers who are in need of a pre-approval letter and/or are in the mortgage process not and are not happy with your current lender, contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. The mortgage team at Gustan Cho Associates is available 7 days a week, evenings, holidays, and weekends.
