The New TILA-RESPA Integrated Disclosure (TRID) Law:
On October 3, 2015, the Consumer Financial Protection Bureau’s (CFPB) new mortgage disclosure law, also known as the TRID will be effective. TRID will help consumers be more informed regarding the closing cost. Here are 11 things you should know about the new law:
1. Initial Good Faith Estimate (GFE) and Truth in Lending disclosure (TIL) are now combined into one new form called the Loan Estimate (LE).
2. Instead of the old forms such as the HUD-1 and Final TIL we now have the Closing Disclosure (CD). Most major lenders will prepare the CD for the borrower; some however may rely on settlement agents. The new form will describe the loan terms, projected loan payments, closing cost at closing, loan features such as assumption, escrow details, borrower’s liability at foreclosure and others. The Sellers will also have a CD statement.
3. The CD will be provided by the Lender to the consumer/borrower at least three days prior to the scheduled closing date but can be waived if consumer has a “bona fide emergency”.
4. The Lender will now provide the borrower with list of closing service providers so that they can shop for services.
5. If the following changes occur then a new CD must be issued with an additional 3 day waiting period:
a.APR changes 1/8 of a percent
b.Pre-payment penalty added to your Note
c.Loan is changed from fixed to variable, negative amortization
6. Closing fees subject to zero tolerance unless otherwise excepted.
a.10% tolerance for charges paid to third parties-charges cannot increase by more than 10%
b.no tolerance-charges can increase without limits if originally disclosed
c.0% tolerance- charges cannot increase at all
7. How do you determine what category you fall in?
a.Does lender allow borrower to shop for the third party services? If third party provider is on the bank list, there is a 10% tolerance, if not on the list there is no tolerance.
8. Fees that can’t increase:
a.fees to brokers or creditor
b.charges to an affiliate of broker or creditor
c.charges to an unaffiliated third party – if consumer not allowed to shop
9. **Any variation of the above must be refunded no later than 60 days after closing.
10. Seller will receive CD by or at closing. This will be prepared by the bank attorney in addition to the statement provided by the Seller’s lawyer.
11. TRID will not apply to: HELOCS, Reverse Mortgages, Commercial Loans and lenders who make 5 or less loans per year.
The Closing process will be more organized, with all the numbers worked out about a week prior to closing so there are no surprises on the closing day.