TRID? Simplified Disclosures
If you’re not associated with the mortgage industry, then October 3rd of this year may have come and gone quietly just like any other typical fall Saturday. However, for mortgage lenders and service providers across the country, this particular Saturday was anything but quiet.
On October 3rd, 2015 the Consumer Financial Protection Bureau (“CFPB”) officially launched its TILA-RESPA Integrated Disclosure (“TRID”) Rule. The TRID rule, an almost 1,900 page piece of legislation, consolidates disclosure requirements under the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”). Prior to TRID, lenders were required to provide consumers with a Good Faith Estimate (“GFE”) and an Initial Truth-in-Lending Disclosure Statement (“TIL”) within three business days of receiving a loan application. Likewise, a lender was required to issue a HUD-1 Settlement Statement and a Final TIL at closing to account for any changes that may have taken place while the loan was in processing. With the rollout of TRID, however, the CFPB replaced the GFE and Initial TIL with the Loan Estimate (“LE”), and replaced the HUD-1 and Final TIL with the Closing Disclosure (“CD”).
So what does this all mean?!?
The combination of disclosures was done by the CFPB in order to aid consumer understanding, and to also make it easier to compare mortgage terms when shopping amongst various lenders. In fact, the CFPB added a section to the LE specifically for this purpose! (See below for example):
New to the “Comparisons” tool are the “In 5 Years” and “Total Interest Percentage (TIP)” calculations. What’s important to know is that the shorter your loan term is, the closer the numbers in the “In 5 Years” comparison will appear, and the smaller the “TIP” will be as well.
In addition to the new disclosure requirements, TRID also requires lenders to reach out to make sure that borrowers are actually receiving and acknowledging any changes that take place while their loans are in process. This is especially important because the CFPB has put certain “clocks” in place that do not allow borrowers to close on their loans until 3-4 days after these changes have been acknowledged!
Although the TRID rule has made a major impact on the mortgage industry, we hope that it makes a minimal impact on your actual borrowing experience. Chose a lender that will take the time to fully explore your options, and give you all the tools you need in order to make an informed decision.
Written by: Zach Brock, Director of Compliance-Licensing & CMS Oversight
Published: 10/14/2015