The Road to the  New TILA-RESPA Integrated Disclosures (TRID)

Part 1 of 4
Question:  Why is this happening?

Answer: In the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), passed in 2010, Congress created the Consumer Financial Protection Bureau (CFPB).  The CFPB became responsible for regulating the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) and was given the task to combine the current disclosure forms required by RESPA and TILA.   Enter the new TILA-RESPA Integrated Disclosures, called the "Loan Estimate" (LE) and "Closing Disclosure" (CD).

Question :  What transactions does the new rule apply to?

Answer:    Applies to most closed-end consumer credit transactions secured by real property i ncluding:
  • Purchase Money
  • Refinance
  • Construction-only loan
  • Loans secured by vacant land or by 25 or more acre
  • Credit extended to certain trusts for tax or estate purposes
  • Timeshare
Question:  What transactions are excluded?

Answer:  Creditors are exempt from providing the Loan Estimate and Closing Disclosure for these loans:
  • Home Equity Line of Credit Loans
  • Reverse Mortgages 
  • Mortgages secured by a mobile home or by a dwelling that is not         attached to real property (i.e. land)
  • Loans made by a person or entity that makes five or fewer mortgages in a calendar year
  • Partial exemption for certain housing assistance programs

Question:  What are the benefits of the new disclosures
 
A nswer:  Mortgages are complex transactions that may include risky features. Consumers currently receive a Good Faith Estimate (GFE) and a HUD-1 Settlement Statement with the terms and costs of the mortgage loan. The LE and CD replace these forms in an attempt to simplify and improve the mortgage process, while reducing consumer confusion.
 

Specific benefits of the new forms and rules include:

  • The interest rate, monthly payments, and the total closing costs will be presented clearly on the first page, making it easier for consumers to compare mortgage loans and choose the one that is right for them
  • More information about the costs of taxes and insurance, including how the interest rate and payments may change in the future.
  • Warnings for consumers about features they may want to avoid, such as penalties for paying off the loan early or increases to the mortgage loan balance even if payments are made on time
  • Making the cost estimates more reliable for services required to close a mortgage loan - for example, appraisal or pest inspection fees.  The rule prohibits increases in charges from the lender (aka creditor), their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies.
Resources

  • Click HERE for the Real Estate Professional's guide.
  • Click HERE to compare disclosures, view sample forms and learn the new timelines on the CFPB's "Know Before You Owe" webpage.
  • Click HERE to view a calendar showing the timing of disclosures for a sample real estate purchase transaction.
  • The CFPB released a TOOLKIT that guides consumers through the process of shopping for a mortgage and buying a house.  Additional Buyer/Borrower resources are also available HERE.
  • The National Association of Realtors offers RESOURCES to help REALTORS┬« prepare for the new disclosure requirements. 

Watch the July 16, 2015 webcast on changes to the closing process, 
with NAR Senior Counsel Finley Maxson


Look for future installments of TRID TALK with Elite Escrow.

 

Elite Escrow Services of San Diego is here to guide you through the challenges of the new regulations.  We are committed to working closely with you, keeping lines of communication open to ensure the transition into the new regulatory environment is seamless.

 

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The information contained herein is provided as an accommodation to the real estate industry and to our clients. It is not intended to be nor does it represent professional legal or financial advice. Elite Escrow makes no representation as to the legal sufficiency or financial consequences of information which is supplied on this website, and we strongly encourage participants in real estate transactions to seek advice from independent legal and financial counsel.