How the new TRID rule will affect you as a borrower

The Consumer Financial Protection Bureau (CFPB), created under the Dodd-Frank Act, has created a new rule to protect you, the consumer, in future home closings. The TILA-RESPA Integrated Disclosures (TRID) rule will start on Oct. 3. Here’s how it will affect you, the borrower, if you apply for a loan application on or after Oct. 3, 2015.

*Many changes have taken place and additional changes are likely to be made prior to the Oct. 3 target date. Minteer Real Estate Team will stay informed to ensure a smooth transition for our clients.

1. New Forms

If you’ve purchased a home before, two new forms, the Loan Estimate and the Closing Disclosure forms, will now replace the HUD-1, Good Faith Estimate (GFE) and the Truth in Lending Act (TILA) disclosures. These forms will also be much more user-friendly for you to understand.

a. The Loan Estimate

Next, if you apply for a home loan you will receive the Good Faith Estimate and the initial disclosure required under the Truth in Lending Act. Now, you will just be given the Loan Estimate, a three-page form provided on a timetable similar to the current GFE. The Loan Estimate must be provided to you, the borrower, within three business days of applying for a loan once you can give the property address for the home you will be purchasing. The Loan Estimate can be delivered in person, by mail or electronic delivery.

b. The Closing Disclosure

This new five-page form will be used to disclose many of the terms and provisions of the loan as well as the financial breakdown of the transaction. This form replaces the HUD-1 Settlement Statement and the final TILA forms.

2. Timing of the closing

Furthermore, you will have three days after receiving the Closing Disclosure to review the form and its contents. This three-day review period starts when you receive the Closing Disclosure form. Unless there is a receipt confirmation of the form, e.g. an email confirmation, the form is “deemed received” three days after the form is mailed. This means the review period can be seven days from mailing to loan signing. (The CFPB counts all calendar days except Sundays and federal holidays.) The Closing Disclosure can be delivered in person, by mail or electronic delivery.

3. Seller’s Side

The Closing Disclosure that is being sent to the borrower will not include information from the Seller’s side of the transaction. The Closing Disclosure  must be delivered to the Seller at or before closing. The Seller also may receive a separate Closing Disclosure from the title company.

4. Fees

Under TRID, a lender cannot impose any fee on a consumer until the borrower has received the loan estimate and has indicated intent to proceed, except a reasonable fee for obtaining a consumer’s credit repair. The reasoning for this is to make it easier for the borrower to shop for and understand interest rates.

5. Closing dates

The National Association of Realtors (NAR) has also recommended adding 15 days to the normal closing time frame. Here in Northeast Tarrant County, closing dates are often 30 days, meaning most offers will be written with a 45-day close.

Closing dates will no longer be called closings, but will instead be called consummation dates.

6. Push backs in closing dates

Furthermore, any changes to the Closing Disclosure after receipt by the borrower may trigger a new three-day waiting period. There may also be changes that will require additional disclosures or review periods.

Some of these changes include:

• Changes that affect the annual percentage rate (APR).
• The Buyer changes loan products.
• A prepayment penalty is added to the mortgage.
• Any changes and adjustments that affect the value of the property as determined by the lender.

It’s important as both a Buyer and Seller to not have the moving truck loaded up on the day of closing (consummation) until you know for sure forms will be signed that day.

Finally, with the new TRID rule, it will be important to work with local lenders who have good working relationships with local title companies to ensure the closing and all forms go as smoothly as possible.