The new year is upon us and with it the mortgage industry has had a few months to get acclimated with the changes brought about by TRID. For those that are unaware, TRID is an acronym for the “TILA-RESPA Integrated Disclosure” regulation that was put into place by the Consumer Financial Protection Bureau (CFPB) on October 3rd, 2015. There were a plethora of things that changed once TRID went into effect, most of which involved reshaping lender requirements to better protect the consumer. In order to help lenders transition to TRID, the CFPB provided a 91 page “Compliance Guide” for lenders to utilize when implementing the regulation. There are five important things covered in the guide that you as the consumer/buyer/seller should be aware of:
▸ The Closing Disclosure (CD) has replaced the HUD Settlement Statement and now must now be provided to the consumer no later than 3 business days prior to closing. In the past lenders could issue a “HUD” the same day as the closing in order to prevent closing delays. Now the lender must issue the CD and the buyer must acknowledge receipt of the CD 3 business days prior to closing. If this deadline is unattainable the closing must be moved.
▸ In order for you (as the borrower) to sign preliminary disclosures electronically, the lender must now have record of your consent being given to do so. This process used to be an all-in-one procedure; lenders could send out electronic disclosures for borrowers to sign without the borrower first granting the lender his or her consent to do so. This is no longer allowed under TRID. Now a two-step process is required in which the borrower first gives the lender consent to send them their disclosures electronically (step one). Upon receiving this consent, the lender is then allowed to send the electronic disclosures to the borrower (step two).
▸ Lenders can no longer require income and asset documentation prior to providing a pre-approval. In the past many lenders required these documents in order to validate the information the consumer provided on the application. Lenders can no longer require such documentation before pre-approval and as such sellers are in a more vulnerable position because they do not know if the buyers have been formally “vetted” (i.e. a preapproval letter does not imply that the borrower’s income and asset documentation has been reviewed by the lender as it once did).
▸ In order for the lender to have an “application” there are six pieces of information that must be attained. Those items include the client’s name (first and last), social security number, subject property address, gross monthly income, loan amount sought and estimated value of the subject property. Prior to TRID implementation many lenders would require one or more additional items depending on their business model.
▸ A Loan Estimate (LE) must be sent no later than 4 business days prior to closing. The LE replaced what was known as Good Faith Estimate (or GFE). What this means is that an LE and CD cannot be issued on the same day, which at times could present an issue for a lender that isn’t in a position to handle the dynamics of today’s environment.
There are several other ways in which TRID affected the mortgage lending process but the items mentioned above are the most noteworthy ones. As always it’s important to work with a professional who understands today’s lending environment and the challenges within it so that you close on time and in a fashion that is conducive to your needs and schedule.
Thanks for reading!