— All About TRID (the new mortgage disclosures)
Starting this week – after October 3rd – getting a mortgage loan has a new disclosure process designed to help the consumer understand, in a clear format, the complexities of a real estate transaction and mortgage loan.
The Consumer Financial Protection Bureau (CFPD) has your back, and wants to be sure you don’t miss any of the risky features that can be confusing in a mortgage/ real estate transaction.
If you are a home buyer or getting ready to refinance, understanding the new rules and mandatory review periods for mortgage disclosure will make sure your home buying process or refinance, is smooth and easy.
The new TRID (TILA, RESPA, INTEGRATED, DISCLOSURE) replaces the current forms with two new forms:
- The Loan Estimate, given three business days after application
- The Closing Disclosure, given three business days before closing.
Specific benefits of the new forms include:
- Combining several forms and additional statutory disclosure requirements into 2 forms using clear language and design.
- Highlighting the information that has proven to be most important to consumers. Interest rate, monthly payments, and the total closing costs will be clearly presented on the first page.
- Providing information about costs of taxes and insurance and how the interest rate & payments may change in the future.
- Warning consumers about features they may want to avoid, like pre-payment penalties for paying off the loan early.
- Protect consumers for cost estimates for services required to close the loan ie: appraisal, pest inspection fees etc… The rule prohibits increases in charges from lenders, their affiliates for services for which the lender does not permit the consumer to shop unless a specific exception applies.
Check out the Q & A’s to familiarize yourself with what has changed and make sure you don’t have any delays at closing.
Why are lenders requiring changes to the disclosures?
Lenders are not the ones that are requiring the changes, nor are lenders requiring the new timeline requirements to allow a borrower to review the Closing Disclosure before they can consummate their transaction. These changes were required as part of the Dodd-Frank Act of 2010 and are being implemented by the Consumer Financial Protection Bureau (CFPB).
Will these changes apply to my transaction?
The regulations apply to most closed-end mortgages, but not to HELOCs (home equity lines of credit), reverse mortgages, or chattel-dwellings like mobile homes (not attached to real property). Those still use the old forms and follow the old rules.
When do I receive my Loan Estimate form?
Once you have provided a lender with your name, income, social security number, property address (not your current address, but one you are interested in purchasing), an estimate of the value of the property (this may even be the sales price), and the amount of the loan you are seeking – the lender is required to provide you with a Loan Estimate form within 3 business days.
Will I still receive a Good Faith Estimate?
No, the new Loan Estimate form takes the place of the Good Faith Estimate.
If the lender sends me a Loan Estimate form do I have to do my loan with them?
You have no obligation to a lender who provides you with a Loan Estimate, and the lender will not move forward until you provide an intent to proceed.
Do I always have to wait 3 days after the Closing Disclosure is issued to go to closing/signing?
Yes, 3 business days is the minimum required time for review according to the CFPB. While there is an exception for “a bona fide personal financial emergency”, the example given for such an emergency (an imminent sale of their home at a foreclosure) is so extreme that lenders will likely not be able to use this exception. It is also important to realize that if the Closing Disclosure is not delivered in person that 3 additional business days are also required for the disclosure to be considered received unless the lender can evidence receipt before then.
The federal regulations require that you have 3 business days to review the Closing Disclosure before consummation can occur.
Do we always have to wait 3 business days after issuing a revised Closing Disclosure before consummation?
There are only 3 situations that require a new waiting period when a revised/updated Closing
Disclosure is issued before consummation:
- The disclosed APR becomes inaccurate.
- The loan product changes.
- A prepayment penalty is added.
Any other situations that may require a revised Closing Disclosure (even post-consummation do not require the 3 business day waiting period. (For example, if damage discovered during a walk through requires a seller credit, it would not require a new waiting period – UNLESS IT AFFECTED THE TERMS OF THE LOAN AND THE APR CHANGED.)
Who will be completing the Closing Disclosure that is now taking the place of the HUD-1?
Lenders will now be responsible for preparing the Closing Disclosure. Previously HUD-1 settlement statements were prepared by the closing agent, title company, or attorney closing the transaction. Now it is the lender’s responsibility to prepare the Closing Disclosure and ensure delivery to the consumer.
Is consummation the same as closing or settlement?
No, consummation may commonly occur at the same time as closing or settlement, but it is a legally distinct event. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.
Will issues at walk-through delay my closing?
If an issue is found during a walk-through, a seller may issue credits to the buyer. Although a new Closing Disclosure would be required, it would not require a 3 day review period.
We hope you found the provided information helpful.
Feel free to contact us if you have any questions that weren’t answered here,
If you are a real estate agent, home buyer, home seller and you want more specific information,
Please go here: http://truthabouttrid.com/jackie-barikhan
We have free fact sheets for each situation.
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