Every so often we have something that changes the way real estate transactions work. One just happened with the implementation of the TRID rules on Saturday, October 3rd. So what happened and how will it affect you?
What is TRID? Where did it come from?
After the financial crisis, including widespread mortgage failures, in 2007-2009, congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act. This act created a new agency, the Consumer Financial Protection Bureau, or CFPB. The name of this agency tells you exactly what it was created for… to protect you, the consumer of financial products. One of the first missions of the CFPB was to look into how people get a mortgage loan and how they understand what that loan means for their future. They call it the “Know Before You Owe” Initiative.
For decades, the mortgage process has been largely centered around two primary regulations: the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). If you’ve closed on a house with a mortgage, you have seen some of these rules at work… among other things the TILA requires all types of disclosures about the interest rate, APR, and finance charges, and the RESPA requires the Good Faith Estimate and the HUD-1 settlement form which breaks down all the accounting involved in a real estate transaction.
The CFPB concluded that these forms, while a good start, had some overlap, weren’t clear enough, and in the case of the HUD-1 weren’t given far enough in advance… so they come up with new regulations creating the TILA-RESPA Integrated Disclosure, or TRID. The new rules mean that you will get a Loan Estimate early in the loan process which combines the first TILA disclosure and the Good Faith Estimate as well as a Disclosure 3 days before closing, which combines the last TILA disclosure and the settlement information.
So what does this mean for me?
In the long-term, this is a good thing! All of the documents have been rewritten to make sure that you understand exactly what you are getting and how much your loan will cost, along with guidance to make sure that you are making the right move for your future.
Of course, there will be a learning curve. With all these new regulations, everyone will be stumbling to make sure they are in compliance. CFPB has even pushed back the TRID start date from August 1, 2015 to October 3 in order for everyone to figure out the rules.
The biggest scare we are looking at right now is the time-frame for the closing… You have to have the disclosure 3 days before your closing, and if it is not handed to you personally your lender will have to allow another 3 days for it to get to you. Sundays (and federal holidays) don’t count, meaning it has to be ready a week before your closing. If anything changes, the disclosure needs to be revised and that clock resets, meaning that the closing may need to be delayed. You can’t revoke your right to a three-day review period.
Now I’m depressed… what can I do?
There’s really nothing to do, and it really will get better. But in the first few months of the TRID regulations please plan on being under contract for a while longer than we are used to. I would plan on at least 60 days from the contract signing to closing, until all the lenders, attorneys, title companies, and Realtors get into the groove. Also, work with your Realtor to make sure that everything possible is done early in the process and avoid surprises near your closing.