The so-called TILA RESPA Integrated Disclosure rule, also known as TRID for short, or Know Before You Owe, was expected to go live on August 1st of this year.
But due to an “administrative error” discovered by the Consumer Financial Protection Bureau (CFPB) at seemingly the eleventh hour, the implementation will be delayed two months and instead be rolled out on October 1st.
Those in the industry will probably be relieved, though not without pointing to the double standard the CFPB (the agency behind the new forms) seems to enjoy. Imagine if lenders complied two months late…
The error would have only delayed the effective date of TRID by two weeks, but the CFPB felt pushing the date back even further would benefit consumers and mortgage providers’ families who are expected to be busy dealing with a new school year in August.
The news came as a bit of a surprise seeing that vendors and mortgage lenders had been pushing for a delay to the new disclosures for months.
It almost appears as if the CFPB finally caved to public pressure, though apparently it’s a real federal law that barred them from moving ahead as originally planned.
What Is TRID?
If you’ve heard the acronym TRID recently, you might be wondering what the heck it is. As mentioned, it stands for TILA RESPA Integrated Disclosure rule.
Further broken down, it amounts to Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure rule. Quite a mouthful I know.
It essentially consolidates four existing disclosures (Truth in Lending forms, GFE, HUD-1) into two new disclosure forms known as the Loan Estimate and Closing Disclosure.
It’s a big deal because the current disclosures have been in use around for about 40 years.
The Loan Estimate, or LE, which contains details such as loan term and projected payment, must be put in the mail and sent to consumers who apply for mortgages no later than the third business day after receiving their application.
For the record, an application is triggered when the lender receives six key pieces of information, including:
- Consumer’s name
- Consumer’s income
- Consumers SSN (to obtain a credit report)
- Property address
- Estimated property value
- Loan amount
The Loan Estimate must also be placed in the mail no later than the seventh business day before consummation of the transaction.
And it expires 10 business days after it is provided if the consumer does not indicate that they wish to proceed.
The Closing Disclosure, or CD, which details all closing costs and the total payments and finance charges associated with the mortgage, must be provided to the consumer at least three business days prior to loan consummation.
Consummation generally means when the borrower signs loan documents, though this can vary by state.
And if certain changes occur, such as an interest rate increase (APR rises 1/8 for fixed loans or ¼ for ARMs), a prepayment penalty is added, or the borrower switches loan programs, a new three-day waiting period is triggered.
Put simply, it gives would-be home buyers a cooling off period to review their loan costs and details before moving forward and signing. As opposed to signing on the spot and feeling rushed or confused.
Additionally, the LE and CD are of the same cloth so borrowers will have an easier time comparing estimated costs and final costs, instead of getting lost in paperwork that looks completely different.
This should help borrowers better understand what they’re being charged and why, and also reduce the chances of getting ripped off.
However, some industry participants worry this could delay loan closings and possibly result in the need for longer lock periods and/or lock extensions, which could ultimately cost consumers.
But lenders can adjust accordingly in order to keep loan closings expeditious. Hopefully they’ll be forced to become more efficient and provide more accurate estimates upfront.
In any case, lenders now have two more months to figure it all out, and in the meantime borrowers will continue to see the old forms.