TRID: New Compliance For Lenders
TILA-RESPA Integrated Disclosures. TRID for short.
It is the best and worst kept secret in the real estate and mortgage industries.
The “Know Before You Owe” rule as it is called, is considered the single most significant regulatory event in the residential mortgage business in thirty years.
The implementation of TRID will bring hard-stop timing requirements that will materially impact the way real estate business is closed.
Consumers, mortgage, real estate, title and lawyering people all need to understand what it is, and what life will be like when TRID gets here.
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3-Day Waiting Periods — No Exceptions
The Consumer Financial Protection Bureau (CFPB) has mandated the abolition of three primary consumer disclosures to which mortgage borrowers have grown accustomed — the Good Faith Estimate (GFE), the Truth-In-Lending statement (TIL), and the HUD-1 Settlement Statement.
In its stead will be two plain-language, easy-to-read disclosures.
The first, called the Loan Estimate (LE) will replace the GFE and TIL. The second — the Closing Disclosure (CD) — will replace the HUD-1 and final TIL.
But TRID is more than just two new disclosures replacing three old ones. There are now carved-in-stone “rules of timing” for lenders to distribute these documents and to get them in the hands of mortgage-borrowing consumers.
On the front-end of the mortgage approval process, lenders must deliver the new Loan Estimate to borrowers three days before any documents or fees are collected.
This means that mortgage pre-approvals cannot be issued until 3 days after the initial application because restrictions exist about when lenders can request supporting income and asset documents including tax returns, pay stubs, bank statements and anything else required to issue a proper pre-approval.
Without such documents, of course, a pre-approval can’t be made and borrowers will need to rely on “", which are worth about as much as the paper they’re written on.
On the back-end of the approval (i.e. closing), TRID’s Closing Disclosure must be delivered to the borrower at least three days prior to settlement. Additionally, if there is a change in loan terms which causes the disclosed APR to move by 0.125 in either direction — up or down — the 3-day clock is restarted.
This means that a last-minute seller concession, contract addendum, or even lender error can delay closing by 72 hours or more. There are no exceptions to the three-day rule — no way, no how, no chance, don’t even ask.
TRID is scheduled to “go live” October 1, 2015.
TRID Protects Consumers
With TRID, there is a lot of upside for U.S. consumers. The new documents are much simpler to understand; and make it easier to compare loans between lenders.
Deciphering skills are no longer needed information on the preliminary Loan Estimate, which can be easily compared to the final Closing Disclosure to ensure you’re being charged for everything you expect, and nothing more.
There are also clearly-defined collars regarding cost disclosures on the Loan Estimate document which, in some cases, allow for no variance in lender-related costs or fees. This, too, protects consumers.
In short, inexperienced mortgage borrowers will be able to make the same good choices as an experienced one; the new documents present information clearly and succinctly.
The downside to the new TRID regulations is that it’s new.
REALTORS®, lenders, lawyers, and title companies will need to keep the TRID’s 3-day closing rule in mind when negotiating or making changes to an already-signed contract. The closer a loan gets to closing, the harder it’s going to be to make a change.
Last minute updates, special favors from the title company, and even buzzer-beating closing miracles will be forbidden beginning October 1, 2015, the date TILA-RESPA Integrated Disclosures goes live.
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TRID disclosures are meant to aid and protect consumers, but when lenders are faced with new rules of compliance, in the short-term, loan costs often rise. This is because the cost of implementation and enforcement is real and is typically passed on to consumers.
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