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What Agents Need to Know About TRID

 

The Consumer Financial Protection Bureau has created the new Truth in Lending Act (“TILA”) and Real Estate Settlement Procedures Act (“RESPA”) Integrated Disclosure Rule, also known as TRID.  The new regulations are quite complex and will likely lead to liabilities and enforcement issues throughout the mortgage industry.  Although TRID will likely not raise liability issues for agents, it will create complications and difficulties for parties.

 

Under TRID, there will no longer be a Good Faith Estimate nor HUD-1.  Instead, there will be a “Loan Estimate” and “Closing Disclosure.”  TRID applies to most consumer credit transactions secured by real property, but does not cover home equity loans or reverse mortgages.  The following transactions are exempt from TRID regulations:  cash; commercial; investor purchases; entity (the regulations apply to a family trust); and carry back, unless the seller meets the definition of a “creditor” or some exempt transactions relating to business, commercial or agricultural.  TRID will apply to applications received on or after October 3, 2015.

 

Once a loan application is submitted and complete, a Loan Estimate must be provided within three (3) business days by the lender.  This requirement could change the handling of preapproval letters by lenders.  A complete application includes the following information:  consumer’s name; consumer’s income; consumer’s social security number to obtain a credit report; the property address; an estimate of the value of the property; and the mortgage loan amount sought.

 

TRID also places restrictions on closing costs.  For example, if a lender is over the estimated closing costs, the lender must make up the difference, depending on the charge.  The Loan Estimate will not change for ten (10) business days.  The borrowers must indicate their intent to proceed within this time frame.  Once a borrower indicates an intent to proceed, the lender may charge fees for appraisals, credit reports, processing, etc.

 

A consumer will receive a Closing Disclosure no later than three (3) business days before signing loan documents.  If the Closing Disclosure is not personally received, three (3) additional days will be added for delivery.  Under current RESPA laws, inspection of the HUD-1 occurs one (1) day prior to settlement upon request of the borrower.  If the Closing Disclosure is provided by email or mail, the review period will be six (6) days.  If changes occur to the Closing Disclosure, it could require an additional waiting period.  For example, changes in the loan’s interest rate, to the loan product or the addition of a prepayment penalty may create an additional waiting period.

 

Although these regulations seem to affect the lender and title/escrow companies, there will be effects on real estate professionals and consumers.  For example, if a buyer changes their loan product at the last minute, the loan documents will need to be redrafted and there will likely be a further waiting period.  In addition, once the Closing Disclosure is prepared, if it is altered, there will be an additional waiting period.  If an agent fails to provide all credits or all requests for reimbursement or credits, it will create a change in the Closing Disclosure, which could create an additional waiting period and in turn, create a further delay in the close of escrow.

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