The TRID Rules are now in effect! Are you ready? Find out how they are changing the home buying process and how they will affect you.
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Whether you are a homebuyer, real estate agent or mortgage loan originator, you should be aware that for loan applications taken on or after October 3rd, 2015 (original date of August 1, 2015), there will be big changes in disclosure documents and settlement procedures for home mortgage loans. The Good Faith Estimate and the HUD-1 settlement statement will go away on most closed-end consumer purpose loans secured by residential real estate. These documents will be replaced by the “Loan Estimate” and the “Closing Disclosure.” These new documents are referred to as the TILA-RESPA Integrated Disclosures (TRID for short).The purpose of these changes is to improve the mortgage loan settlement process for consumers. They are being implemented by regulations issued by the Consumer Financial Protection Bureau (CFPB), a federal government agency set up to look out for the interests of consumers seeking financial services. To learn more, please use the resources found on this page, or visit the CFPB’s website for very helpful information and further details on the new settlement process changes.
What if the purchaser has taken application with the lender prior to October 3rd but closing hasn’t occurred yet?
TRID applies to application taken on or after October 3rd. If the application was taken prior to October 3rd the current rules apply and the purchaser will receive a Good Faith Estimate, Truth in Lending and HUD1 settlement statement for closing.
How will the new rules affect the closing dates on purchase agreements?
The National Association of Realtor (“NAR”) is recommending that 15 days be added to the purchase contract. So for example, if you customarily have a purchase contract that requires closing within 30 days, under TRID it is recommended that you now require closing within 45 days. A link to the video is provided here.
What costs or fees can change without requiring re-disclosure of the Closing Disclosure (“CD”)?
It is imperative that all information typically collected by the realtor prior to settlement (hazard insurance, HOA fees, seller contributions, commissions, and other fees due to the realtor) are collected in advance in order to prepare the initial CD. Although re-disclosure of the CD is required under 3 circumstances: 1) an “increase” of the APR; 2) the addition of a prepayment; 3) a change in the loan product. Realtors are encouraged to perform walk-through in advance to avoid last minute delays. Guidance for real estate professionals from the CFPB is provided here.
How does TRID affect the seller?
Under TRID the seller will now receive a separate CD that is prepared by the settlement agent. The settlement agent must deliver the CD to the seller 1 day prior to settlement.
Why are the forms changing?
The reason for the change is two-fold: 1) to provide the consumer with simpler forms to explain the loan transaction and 2) deliver the forms in manner that gives the consumer to review and lesson last minute “surprises” during the loan consummation.
When was the last major change to the forms?
The current forms have been required for consumers applying for a loan for over 30 years. The new forms will stream line information and eliminate overlaps in information that exist on the current forms.
How will this affect my closing date?
For purchasers, it will be important that you work closely with your lender regarding approval of the loan and coordination of final walk-through with the realtor. Some contracts may increase from a 30 day closing to a 45 day closing which means move-outs, subsequent closings and other relocation tasks may need to be adjusted to ensure a seamless move. For more information visit the CFPB.