TRID is the new federal consumer disclosure law that’s turning the real estate industry on its head. TRID will significantly change the way a mortgage lender discloses to consumers the terms, conditions, and costs associated with most residential mortgage loans. While these new rules were supposed to take place as of August 1, 2015, implementation has been pushed back to October 3, 2015.
TRID stands for “TILA-RESPA Integrated Disclosure.” The TRID disclosures essentially replace today’s Truth In Lending, Good Faith Estimate, and HUD-1 Closing Statements with a new “Loan Estimate” and a “Closing Disclosure.”
According to the federal government, the new Loan Estimate and Closing Disclosure are supposed to help consumers avoid the confusion associated with today’s mortgage disclosures and “provide consumers with a simplified, consolidated, and improved disclosure form that uses clear language designed to help consumers understand complicated mortgage loans and real estate transactions.”
(SIDEBAR: Since the government clearly has a poor record of “simplifying” disclosures in the interest of consumers, time and public opinion will confirm whether this attempt is truly successful.)
Like the initial TIL and GFE disclosures it replaces, there are time constraints regulating the new Loan Estimate. The Loan Estimate must be delivered to the borrower within three business days after receipt of a loan application and at least seven business days prior to the loan’s closing.
However, unlike the current HUD-1 Closing Statement which has no requirement to be provided to the borrower prior to closing, the new Closing Disclosure must be delivered to and received by the borrower at least three business days prior to the “consummation” (which is usually the closing) of the transaction.
A closing CANNOT take place until this three day waiting period has concluded.
A change in loan product, addition of a prepayment penalty, or a change in Annual Percentage Rate (beyond 1/8 % for a Fixed Rate or 1/4% for loans with irregular payments) on a loan will require re-disclosing an updated Closing Disclosure and a new three-day waiting period. Additionally, while not required by regulation, you can be sure that some lenders will act conservatively and re-disclose based on changes to other closing costs as well!
In addition to the typical closing costs already disclosed on the Good Faith Estimate, the Consumer Financial Protection Bureau (CFPB) has made it clear that ALL fees paid by the borrower, even if not required by the lender or part of the loan transaction, must be disclosed on the new Loan Estimate! Such fees include (but are not limited to) real estate commissions paid by the buyer, engineer inspection fees, personal attorney fees, condo, coop, or homeowner’s association fees, and even payments to the seller to purchase personal property pursuant to the contract of sale.
Preparation for TRID is already causing confusion, logistical, and implementation nightmares for real estate attorneys, Realtors, title/abstract companies, lenders, and mortgage software providers. Now more than ever it’s critical that buyers work with a superior team including a real estate attorney, real estate agent, and mortgage professional, ALL whom are competent, qualified, and attentive. Only with a superior team communicating and coordinating effectively can home buyers avoid potential delays and the costs these delays often create.
At Mortgage Wealth Advisors, we enjoy working with industry-leading professionals, truly excellent real estate attorneys and Realtors who serve their clients well and also return phone calls. Please contact my office to receive an introduction.
(Special thanks to Michael Barone, Esq. and Neil Garfinkel, Esq. of Abrams Garfinkel, Margolis, Bergson, LLP for contributing to this article.)
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.