What in the World is TRID?
Well, first off let me say that as a Real Estate Agent and not a Mortgage Broker it is easy for me to simplify this topic seeing how I am not the one preparing these required disclosures etc. TRID is not just a bunch of new disclosures and paperwork that the government(The Consumer Financial Protection Bureau(CFPB) has decided to impose on the lenders....it is actually New Closing Rules that affect all parties involved in a transaction when there is a mortgage that the buyer is obtaining to purchase a residential property.
History behind this change:
- TRID stands for TILA-RESPA Integrated Disclosure; this title says exactly what it is; which is a combination of TILA (Truth in Lending Act) and the RESPA (Real Estate Settlement Procedures Act). Any transfer that involves a mortgage will use new disclosures required by the CFPB in order to simply matters and merge the two laws.
- TILA, the Truth in Lending Act required lenders to layout information to all consumers when they shop for mortgages.
- RESPA, Real Estate Settlement Procedures Act required lenders to disclose all costs involved with the transfer of a residential property.
- With the passing of the Dodd-Frank Wall Street Reform Act after the financial crisis, the CFPB was then directed to simply the two laws and merge them.
- This is NOW in effect as of OCTOBER 3rd, 2015.
What changes are there?
- There will no longer be an HUD settlement statement or a Good Faith Estimate (GFE) now there will be a new LOAN ESTIMATE & CLOSING DISCLOSURE.
- Lenders will have to tell consumers (Loan Estimate) what the costs for the loan are within 3 business days of a loan application. Loan providers will also have to provide more precise figures for the borrowers.
- The buyer will have to know precisely how much the transaction will cost 3 DAYS prior to the transaction.
How will this affect the Buyers and Sellers?
- Consumers have 10 days to decide if they want to go forward with the loan after receiving the Loan Estimate. Some items will be estimates but most charges itemized will be actual true costs.
- Both Buyers and Sellers need to know if there are changes then the timeline will be affected.
- TILA will be in effect for ALL LOAN TYPES!
- Final week of transfer the Closing Disclosure must reach the consumer 3 DAYS before closing act
What flexibility is there prior to closing?
- There are changes that can be made several days before the closing or at the closing table with the EXCEPTION of the following:
- The interest rate changes on a fixed rate by an eighth of a percent or a quarter of a percent on an adjustable rate.
- Consumer changes their rate from fixed to adjustable.
- Lender changes to mortgage terms by adding prepayment penalty.
How does this affect the Purchase and Sales?
- Add an additional 2 weeks to the previous timeframes from an effective contract to closing.
- Complete the final walk through several days prior to closing instead of 24 or 36 hours.
- The new closing rules apply to the residential market and do not apply to commercial sales or all cash sales.
- The Home Buyer Closing Disclosure will typically be prepared by the lender instead of the title companies.
The Real estate industry is now starting to work through these changes and learn to adjust the contracts, timeframes, and content in order to adhere to the new rules. These new rules may seem foreign and confusing but as we become familiar with all these changes it will start to be as common as an HUD and GFE.
You can read more at www.consumerfinances.gov
See the chart below to check the county, city or town you are interested in purchasing in.
