Consumers can see clearly now – CFPB adds transparency to the mortgage process

October 3, or “T-Day” – as in TRID – has come and gone. TRID is a little acronym with a big impact on how the mortgage industry does business going forward. But what, exactly, does it mean – and what does it mean for lending companies, professionals and homebuyers?

What’s in a name?
To recap: as part of the Dodd-Frank Wall Street Reform Act, the Consumer Financial Protection Bureau (CFPB) was charged with revising and simplifying the rules regarding mortgage loan disclosures as they apply to mortgage lending under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The new, combined rule is referred to as the TILA-RESPA Integrated Disclosure (TRID) rule.

What’s it all about?
The rule has a few key purposes: reduce paperwork, improve the clarity of information required and add a level of transparency into the financing process that will allow consumers to better understand and compare their options.

Paperwork
In the past, buyers were provided with both a Good Faith Estimate (GFE) and initial Truth in Lending (TIL) disclosure. With TRID, those two documents will be replaced with a single document – the Loan Estimate. Additionally, the final TIL disclosure and the HUD-1 Settlement Statement will be replaced with the new Closing Disclosure. Both the Loan Estimate and Closing Disclosure emphasize information that has proven to be the most important to borrowers.

Clarity and Transparency
The new Loan Estimate is a detailed preview of the loan terms and fees for services performed in conjunction with the transaction. Some of the new features on the Loan Estimate that are not currently on the GFE include:

  • Projected Payment Schedule – details changes in the principal and interest that may occur over the life of the loan.
  • Cash to Close – clearly demonstrates the amount of funds the consumer(s) will need to bring to closing.
  • Total Interest Percentage (TIP) calculation – explains the interest paid over the life of the loan as a percentage of the actual loan amount.

Delivery
The timing of the delivery of both the Loan Estimate and Closing Disclosure is designed to give a consumer a reasonable amount of time to react to or act upon the documents.

The Loan Estimate must be delivered or placed in the mail within three business days of the lender receiving the consumer’s application and at least seven business days prior to the closing date (the date that the consumer becomes contractually obligated to the loan’s creditor).

The Closing Disclosure must be received by the consumer with the primary loan obligation, or all parties with the right to rescind, at least three business days before consummation. Note that a “business day” is defined as all calendar days, except Sundays and legal holidays.

Get more FAQs on TRID
To learn more about TRID and to view sample forms, visit the CFPB website at http://www.consumerfinance.gov/regulatory-implementation/tila-respa/.

This material is for informational purposes only and does not constitute legal advice.

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Oct 3, 2015

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