What is TRID?
TRID: (TILA-RESPA Integrated Disclosure or the Truth in Lending Act and the Real Estate Settlement Procedures Act Integrated Disclosure) is not only a mouthful but more importantly, a new law that went into effect on October 3, 2015. The purpose of this law is to better inform a borrower about the costs and risks of his/her loan. This law calls for combining two forms (The Good Faith Estimate and the Truth in Lending) into a new form the (Loan Estimate) and the (HUD 1 and Truth in Lending) into another new form (Closing Disclosure). These two new forms, the Loan Estimate and the Closing Disclosure, are more straightforward and easier to understand, this then allows the consumer to be better informed in the loan process and to comparison shop.
In the past, the mortgage industry was controlled by multiple federal agencies. After the mortgage crisis The Dodd Frank Act of 2010 was put into place to provide oversight, and The Consumer Financial Protection Bureau (CFPB) was formed. The CFPB is responsible for monitoring, enforcing, and fining lending institutions if they do not comply with TRID which was designed to empower consumers.
What does TRID mean for Buyers?
As a buyer seeking a mortgage, under TRID you will be better able to comparison shop between lenders to determine which is best for you. In order to do this effectively, you need to do your research up front. This means you must identify which lenders you want to compare, identify a property, and give each lender the required information for loan approval. Let the lenders know you are comparison shopping and that this is a “sample property.” Lenders are required to give you the Loan Estimate within three days of your application. When you receive the Loan Estimate from each lender, compare them line for line and pick the one that is best for you. Now, when you identify the property you want to buy, you will already know which lender is best for you. If you wait to compare lenders until after you identify the property you want to buy, you have lost precious time in the buying process. When comparing lenders it is very important to select between those with a proven track record of integrity and accountability. When you receive your Loan Estimates contact the lender and ask questions if you see a large discrepancy between two Loan Estimates for the same property.
At the end of your transaction, under TRID, the lender is required to give you the Closing Disclosure. This disclosure will give you more detailed information regarding the terms of the loan and will have to be provided to you three days prior to closing. This is to ensure that you have enough time to review the document and is designed to allow for more transparency and hopefully increase consumer confidence in the loan process. Any changes to the contract that effect the cost of your loan will require a three day notification period. Before TRID, buyers and sellers could negotiate changes and the closing paperwork could be adjusted accordingly often even as late as the day of closing. Now it is especially important to do all inspections and negotiations as early in the transaction as possible. Final walkthroughs should be completed 7 – 10 days before closing to allow ample time to deal with issues that may come up.
As buyers, sellers, realtors, lenders, and title companies become familiar with the new regulations transaction lengths should go back to the pre TRID time period of about 30 days. For now, expect your transaction to take about 45 days. You can help the process by providing your lender with all of the information they require as quickly as possible, scheduling your inspections right away, and completing your walk through 7-10 days before your closing.
What Does TRID Mean For Sellers?
As a seller, be aware that it will likely take longer to close on the sale of your home once you are in contract. Keep that in mind as you are trying to purchase your new home and scheduling your move. Buying a new home and selling your current home at the same time will be more complicated because of the required three day waiting period but will not be impossible. Your realtor can help you negotiate a possible rent back period and can help keep you on track throughout the process.
If you are buying a property with cash, buying a commercial property, or applying for a home equity line of credit, the new forms and waiting periods will not apply. If you have any questions about TRID or have any other real estate questions, contact me. I am always available to answer your questions and help you reach your real estate goals.
