CFPB launches TRID tools for Real Estate Brokers
By Neil Garfinkel, Esq.,
Partner-in-Charge of AGMB’s Real Estate & Banking Practices, and
Marie J. Gannon, Esq., Senior Associate
TRID is a new consumer disclosure law that goes into effect on October 3, 2015. TRID will significantly change the way a mortgage lender discloses terms and fees of most residential mortgage loans to an applicant as it requires the replacement of the Good Faith Estimate, Final Truth-in-Lending Disclosure, and HUD-1 Settlement Statement with new disclosures known as the Loan Estimate and Closing Disclosure.
We previously issued a “Top Ten List” of things to know about TRID to assist real estate professionals. Below please find a copy of the list for your reference:
-TRID stands for TILA-RESPA Integrated Disclosure.
-TRID is a federal law which requires mortgage lenders to provide consumers with certain disclosures during the loan application and closing process. These disclosures summarize the terms of the loan, such as the interest rate, and the costs associated with obtaining the loan.
There are two new consumer disclosure forms required by TRID, the (i) Loan Estimate and (ii) Closing Disclosure.
-The Loan Estimate, or “LE,” replaces the current disclosure forms known as the Good Faith Estimate and initial Truth-in-Lending disclosure (“TIL”). The purpose of the LE is to give consumers a better, more clear understanding of the terms of their loan and the costs associated with such loan. With more complete knowledge the consumer can then, in theory, shop for and make an informed decision about the mortgage product that best fits their needs.
-The regulatory body responsible for implementing and overseeing TRID, the Consumer Finance Protection Bureau (the “CFPB”), refers to the Loan Estimate as a “Know before you Owe” disclosure.
The Closing Disclosure, or “CD,” replaces the current disclosure forms known as the HUD-1 Settlement Statement and the final TIL. The purpose of the CD is to finalize information that appears on the LE, including the mortgage terms and the projected payment amount, as well as to summarize the closing costs incurred by the purchaser and seller.
-TRID imposes certain dates by which the LE and CD must be delivered to a borrower. The Loan Estimate must be provided to the consumer by the third business day after receipt of a completed loan application and at least seven business days prior to the closing of the loan. The Closing Disclosure must be delivered to and received by the borrower at least three business days prior to “consummation” of the transaction (usually the closing of the transaction). The three business day period can be referred to as the “Waiting Period” and a closing cannot occur until the conclusion of the Waiting Period.
There are three events that require a re-disclosure of the CD and a new Waiting Period prior to closing. They are: (1) an increase in the annual percentage rate (APR) by more than 1/8 of a percentage point for a fixed rate loan or 1/4 of a percentage point for an irregular transaction, such as a variable rate transaction, (2) the addition of a prepayment penalty; and/or (3) changes in the loan product, such as from a fixed rate to an adjustable rate loan. Although, the Waiting Period will not be required to commence again for changes other than these three events, the lender is still responsible for giving the borrower a new CD if there are any changes to the CD after it is presented to the borrower.
The CFPB recently announced that it will be issuing a proposed amendment to delay TRID’s effective date from August 1, 2015 to October 3, 2015.
Real estate agents are an integral part of the closing process and will play an important role in facilitating the implementation of TRID and its various delivery requirements. More specifically, real estate professionals should be prepared to do the following things: (i) educate consumers and professionals with respect to TRID and its various elements, (ii) set reasonable expectations for all relevant parties regarding potential closing delays, (iii) assist the various professionals associated with the closing process in creating a collaborative work environment so that all closing costs can be provided to the lender in order to prepare the CD and (iv) understand the situations which require a new Waiting Period and the situations, such as adjustments necessitated by a pre-closing walk through, that do not require a new Waiting Period.
Recently, the CFPB announced the launch of the “Know Before You Owe: The Real Estate Professional’s Guide” webpage to help explain the new TILA-RESPA Integrated Disclosure rule (“TRID”). The site may be found at consumerfinance.gov/know-before-you-owe/real-estate-professionals. According to the CFPB, the website and its contents are intended to help residential real estate professionals work with clients to “ensure smooth and on-time closings.”
The webpage includes information on TRID and how to prepare clients under the new requirements, as well as links to resources for clients, such as the CFPB’s Home Loan Toolkit, which is a step-by-step guide designed to assist consumers when buying a home.
Specific topics covered on the site include:
-Smooth and on-time closings – provides real estate professionals with a list of five steps to prepare clients for the mortgage loan application and closing process;
– New disclosures streamline the process – provides a detailed description of the new Loan Estimate and Closing Disclosure and how the documents work together;
-Learn what has and hasn’t changed about the mortgage process – provides a list of seven facts real estate professionals should know about the mortgage process under TRID;
– Extra three-day reviews are unlikely – explains that lenders must provide clients with the Closing Disclosure three business days before closing and that there are only three changes to the Closing Disclosure that will require a new three day waiting period: 1) the APR increases by more than 1/8 of a percent for regular loans and 1/4 of a percent for irregular loans, 2) a prepayment penalty is added, or 3) the basic loan product changes; and
– Share CFPB resources with your clients – provides resources the CFPB believes will help clients navigate the mortgage loan and home buying process, such as the Home Loan Toolkit and interactive guides for the Loan Estimate and Closing Disclosure.
CFPB Finalizes Two-Month Extension of Know Before You Owe Effective Date
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today issued a final rule moving the effective date of the Know Before You Owe mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures rule, to October 3, 2015. The rule requires easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer. The Bureau issued the change to correct an administrative error that would have delayed the effective date of the rule by at least two weeks, until August 15, at the earliest.
The Bureau is finalizing Saturday, October 3 as the effective date. The Bureau believes that moving the effective date may benefit both industry and consumers with a smoother transition to the new rule. The Bureau further believes that scheduling the effective date on a Saturday may facilitate implementation by giving industry time over the weekend to launch new systems configurations and to test systems. A Saturday launch is also consistent with industry plans tied to the original effective date of Saturday, August 1.
The final rule issued today also includes technical corrections to two provisions of the Know Before You Owe mortgage disclosure rule.
A copy of the final rule is available here: http://files.consumerfinance.gov/f/201507_cfpb_2013-integrated-mortgage-disclosures-rule-under-the-real-estate-settlement-procedures-act-regulation-x-and-the-truth-in-lending-act-regulation-z-and-amendments-delay-of-effective-date.pdf