The Consumer Financial Protection Bureau issued a new rule beginning in October 2015 that combines mortgage disclosures previously established by the Truth-in-Lending Act and the Real Estate Settlement Procedures Act. The purpose of this new rule entitled TRID which stands for TILA-RESPA Integrated Disclosure is to improve consumer understanding of the mortgage process, aid in comparison shopping, and help to prevent surprises at closing.
Pre-TRID, two different disclosure forms explained the terms and costs of mortgage loans consumers were considering: the initial Truth–in-Lending disclosure with the Good Faith Estimate. Consumers also received two final disclosures at closing: the final Truth-in-Lending disclosure with the HUD-1 Settlement Statement. These disclosures had overlapping information and complicated terms, which made them hard for borrowers to understand and for lenders to explain. TRID combines these four disclosures to help improve consumer clarity and promote industry compliance. A three-page Loan Estimate replaces the initial Truth-in-Lending disclosure and Good Faith Estimate. The final Truth-in-Lending disclosure and HUD-1 Settlement Statement are replaced by a five-page Closing Disclosure. TRID rules will affect the length of time to complete real estate transactions. From offer to acceptance, the real estate transaction will be extended to approximately 60 days. This means that all deadlines need to be tighter and that items typically left for a few days before closing have to be done earlier in the transaction. Offer forms and purchase and sale agreements can be updated with a simple TRID Rider addressing each of these revisions. It is important to use a Rider that protects the buyer from delays otherwise they could be at risk of losing their deposit. Another impact of the TRID rules is the date on which all parties must provide the information necessary for the closing attorney and the lender to prepare the final Closing Disclosure. The Closing Disclosure must be issued to the borrower at least 3 days prior to closing. In order to timely generate the new Closing Disclosure, lenders will require all information necessary to prepare the Closing Disclosure well before this deadline. Accordingly, all information necessary to prepare the Closing Disclosure should be submitted to the closing attorney about 20 days prior to closing. An exact date should be agreed to in the purchase and sale agreement.
3 Comments
|