What Does TRID Mean For Borrowers?

Beginning on October 3, 2015, the TILA-RESPA Integrated Disclosure, or TRID, will go into effect. It is commonly known as the “Know Before You Owe” rule. TRID is designed to make sure all mortgage lenders’ disclosures are clear, correct, and easy for buyers to understand. Buyers will also have more time to review disclosures. TRID will become the new mortgage standard, as it is mandated by the Consumer Financial Protection Bureau (CFPB.)

There will be two new forms under TRID: the Loan Estimate (LE) and the Closing Disclosure (CD). The new forms will clearly and concisely detail the loan details such as: cost, risks, if any terms can change after closing, and if there is an early payment penalty. Both forms are designed to work together. In a study ran by the CFPB, participants provided more correct information with the new forms than they did with the old forms. Correct and accurate information minimizes the need for re-issuing forms, thus keeping the process moving.

The Loan Estimate (LE) will replace the Good Faith Estimate (GFE) and initial Truth-in-Lending Disclosure (TIL). The LE is specifically designed to make sure the costs and risks are clear and easy to understand. The borrower must receive the LE within 3 business days of submitting a loan application. An application is considered received when these six items are received: name, income, social security number, property address, estimated value of the property, and mortgage loan amount sought. A borrower then has up to 10 days to proceed with the loan or not. After 10 days the LE will expire. Under TRID, if any changes are made to the Loan Estimate the disclosures must be re-issued and re-signed. The LE is just an estimate of the total costs, not the final costs.

The Closing Disclosure Form (CD) will replace the HUD-1. The CD will combine the previous HUD-1 and the final Truth-in-Lending Disclosures. The CD contains all of the actual final costs of the loan, as opposed to the estimate of costs. The form is designed to be easy to compare to the LE to see how the actual costs compare to the estimated cost of the loan. Unlike the previous HUD-1, the borrower must receive the CD at least 3 days before closing the loan. If there are any changes in the loan cost within 30 calendar days of signing documents, a revised CD must be delivered within 30 days of the change.

While many anticipate TRID will slightly change the loan process as we know it today, many lenders, including Mountain West Financial, have been making preparations to ensure our policies and procedures meet the expectations set by the CFPB and are as simple and efficient as possible to ensure timeframes are not impacted. So, what does this mean for you as a buyer? The process will be more transparent and easy to understand. The primary objective of TRID is to help homebuyers understand the cost of their loan before and during the home loan process. We look forward to working with our borrowers, realtors, and other affiliates to make the transition seamless and continue our mission of making homeownership a reality!

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.