Wednesday, November 18, 2015

10 Things home buyers and sellers should know about TRID.

If you’re buying or selling a home these days, you should be aware of TRID – a new sets of rules that are aimed at protecting homebuyers and adding more transparency to the lending process. In fact, T.R.I.D. (or TRID) stands for the TILA-RESPA Integrated Disclosure rule, and was enacted by the Consumer Finance Protection Bureau for all transactions after October 1, 2015 as part of the Dodd-Frank Wall Street Reform Act. 

While TRID endeavors to make mortgage lending more transparent and easier to understand, protecting consumers from rushed decisions, overly aggressive sales tactics, confusion and outright fraud, the addition of new procedures and a change in loan documents is often extending loan closings slightly. With informed, organized, and diligent buyers and sellers (as well as their Realtors), there usually isn’t a need to extend escrow or slow the closing.

Here are 10 things you should know about TRID:

1. TRID effectively amends the existing procedures for how loans are set up and fees disclosed to borrowers.

2. The biggest benefit of TRID to borrowers is the change in forms that allows them now to easily see the relevant details of their loan in one place. It used to be that the title company was responsible for forms like the Closing Disclosure, or HUD-1, but now the lender will be assigned that task.

3. But probably the most significant change brought on by TRID is that this new Closing Disclosure must be delivered to consumers three days prior to the loan’s closing. That’s designed to give homeowners a chance to thoroughly go over the document and all of the details of the loan.

4. So when it comes to signing at the closing table, instead of feeling rushed, overwhelmed, and sometimes even pressured to sign (and how could a person not feel those things with the enormity of mortgage and then real estate paperwork one has to sign in order to close on a house), they’ll now have all of the information they need well before the closing. That way they can ask questions, lobby for corrections, or just familiarize themselves with the documents they will be signing, long before they sit at the closing table with pen in hand.

5. This also grants all professional parties involved: title and escrow professionals, mortgage lenders, Realtors, etc. an opportunity to present mistake-free and well-reviewed documents.

6. Another big change that’s brought on with TRID is that its Closing Disclosure form must be provided to the consumer at least three business days before loan closing. The calendar used to calculate TRID’s 3-day period uses Monday–Saturday but excludes most major holidays.

7. Any important changes to the terms of the loan (like a prepayment penalty added, the loan product changes, the APR shifts because of fees, etc.) has to be reported in the Closing Disclosure, and could potentially create a new three business day waiting period as a way to protect consumers. 

8. Additionally, the format in which the client is provided and acknowledges receipt could further delay the closing. For instance, if the CD has to be mailed, there is a required additional 3 days period to pass a presumption of delivery by the postal service. 

9. The new Loan Estimate form basically combines the Good Faith Estimate (GFE) and the Truth in Lending Disclosure into one shorter form. That makes it easier for the consumer to check the key features of the loan as well as costs and risks right in the start of the mortgage process. Lenders have to provide a Loan Estimate form within three business days of applying for a loan, starting with the time they provide their name, income, Social Security number, property address, value estimate, and the mortgage loan amount they wish.

10. As you can see, TRID takes some of the burden from title companies and places it with lenders, who are now responsible for extra, time-sensitive document preparation. In the long run, we expect it to help both the industry as a whole and those who are taking out mortgage loans.

TRID will surely deliver huge benefits to consumers, but the cost of that increased security, clarity, and ease is that the loan process will take a little longer. That may have an impact on real estate transaction timelines, so real estate agents, sellers, and buyers all need to adjust their expectations, communicate effectively, and work as a team to close home buying transactions in a smooth and timely manner.


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