Are You Ready for "TRID"?

A recent article in Mortgage Compliance Magazine is making the statement that dire warnings to prepare for the implementation of the new TILA-RESPA Integrated Disclosures ("TRID") are being ignored by a majority of those who will be most affected.  The new disclosures, also referred to as "Know Before You Owe", will be required as of August 1, 2015 and will combine the currently required good faith estimate and preliminary TILA disclosure into a "Loan Estimate", and will combine the HUD-1 settlement statement with the final TILA disclosure to form a "Closing Disclosure".

The new regulations do require some changes in the current way in which a residential consumer mortgage loan transaction is handled.  This is in large part due to the fact that the mortgage lender is now at the point of all required paperwork in connection with a consumer mortgage loan, except for reverse mortgages, mortgage loans secured by a mobile home, and second mortgages such as HELOC loans. 

The lending industry is being held responsible for all disclosures from the very outset of a consumer loan transaction through the closing of the transaction.  Whether lenders will rely on mortgage brokers and settlement agents to make the various disclosures accurately and timely will remain to be seen.  Of the more prominent lenders that have announced their intentions at this point, most seem to be indicating that THEY will make the disclosures which means that mortgage brokers, settlement agents, and others will need to get information to the selected lender in an efficient and timely manner so that disclosures can be made within the time frames established.  This applies to both the Loan Estimate and the Closing Disclosure.  As you can no doubt imagine, lenders are a conservative bunch by nature and most are unlikely to rely on third parties to make accurate and timely disclosures for which the lender is responsible.  With the lender be placed in a more proactive position in a real estate closing transaction, there is a likelihood that delays will occur at least initially until all the bugs are worked out similar to other new applications and procedures that we are about to experience.

As is currently the rule for good faith estimates and preliminary TILA disclosures, the "Loan Estimate" which replaces the good faith estimate and the preliminary TILA disclosure, must be provided within three days after the lender receives the buyer's application.  The catch with the new regulations is that the definition of "application" has been changed such that an application will be deemed made when the lender (or broker if one is involved) receives the buyer's name, SSN, buyer's income, property address, estimated property value, and loan amount.  When a lender / broker has that information regardless of the form it is in, the lender must provide the Loan Estimate within three days.  There is no longer a provision which allows a lender to delay the issuance of preliminary disclosures by asking for "such other information as the lender deems appropriate or necessary", or which allows the lender to verify the information it has received.

Under the new rules, the lender will be the party responsible for the preparation of the "Closing Disclosure" which combines the information currently contained on the HUD-1 Statement (i.e., all closing costs) and the final TILA disclosure.  The lender must provide to the buyer the Closing Disclosure three days prior to the closing date.  Thus, the lender will either need to assemble all closing costs from the various parties interested in the transaction, or rely upon the settlement agent to prepare and timely provide the Closing Disclosure.

The new regulations will affect all real estate and mortgage professionals to one extent or another.  We do all need to be familiar with the new regulations and forms as we will all need to provide information necessary for the completion of one form or another or both. 

The regulations that detail the requirements for the new disclosures are in Title 12 of the Code of Federal Regulations, Sections 1026.37 and 1026.38, which can be located HERE.  The CFPB web page that contains explanations, manuals, and forms for the new regulations can be found HERE.