On October 3rd 2015 TRID took effect on the mortgage loan industry, this rule and new disclosure form sent shock waves and very loud and clear message to the mortgage industry. In the simplest of terms, disclose in a timely professional manner as soon as possible with the most accurate information one can put together for the consumer.
The thought behind this page is after more than a year of TRID and feedback from the average or very novice first time home buyer we have worked with, who has never read the government information to be able in Layman’s term or more simple in today’s street talk help get the basic message across. If you feel you want the legal and official written rules please visit the government websites or talk to your real estate attorney. This is not a substitute for legal advice.
On other pages of this website I give a brief on TILA and RESPA. Those two pages are the basic preface to this page. TRID was designed for the everyday consumer to better understand their total cost associated with a mortgage loan. This includes both the refinance and real estate purchase with a mortgage loan. The rule is very strict and all licensed professional involve with the transaction must follow the rule accurately. This rule is designed to better protect the consumer. However, this rule does have its unforeseen side effects if the consumer does not respond in a timely manner to their loan originator’s request for documentation.
Breaking down TRID for you the borrower in Layman’s terms. There are two basic parts you will experience and must acknowledge in order to proceed with your mortgage loan process.
The first part is the LE (Loan Estimate). This form is the merger of two forms TILA and RESPA in shorten format. This basic form is the outline of cost you may experience upon closing of the mortgage loan. Some of these costs are generally a reasonable higher estimate of what you may experience. Reasonable meaning the cost should not exceed a certain percent of actual pricing.
You must be sent an LE within three days from the time you submit a full loan application. A full loan application includes but not limited to your name, subject property address, social security number, income, assets, estimated value of the property, and the loan amount you are apply for.
Along with the LE you will receive addition disclosures that are requirement by law and the discretion of the lender. Included will be the letter of intent to proceed. This letter of intent is only that. When you receive this disclosure package you will ask to acknowledge the receiving of the documents. This is only an acknowledgement and not an obligation to sign or accept the mortgage loan program. The letter of intent is only a form that states you wish to continue along with the loan process and is still not a contract obligation to close on the mortgage loan. However, if this transaction involves a real estate purchase and sales agreement you should review your terms and conditions in your contract with your real estate professional or real estate attorney.
A LE may be generated by your mortgage broker or lender any time something in the process changes. Common examples include but are not limited to the following;
- Changing the proposed or applied for note rate from float to lock
- The appraisal came in at a lower than expected value
- A home inspection caused a change in contract price
- Any other unexpected or non-standard change or unforeseen condition
- A change of the loan program
- Change in the loan amount
- Any change in the purchase and sales agreement that effects price or value
If an LE is not acknowledged and the letter of intent to proceed is not signed the lender may not be able to continue working on your mortgage loan. Most lenders today use E-Sign. Please remember if your transaction involves a real estate contract, delaying your mortgage process could put your earnest deposit money at risk. Please review with your real estate agent or real estate attorney.
The second basic part of TRID is the CD (Closing Disclosure). Once the CD is release there is a mandatory wait time of three business days allowing the borrower to review their disclosures and cost prior to the closing. The CD is most cases still may have highest cost listed. It is important to acknowledge the CD in order to start your required clock towards your closing day. This acknowledgment does NOT mean acceptance of the cost or fees involve with the closing. At this point your loan originator, closing agent and lender will continue to work on balancing the cost fees and insure you are not over charged. Most often the final CD is released prior to closing with the accurate total cost. Sometimes this process take the full three days prior to closing to clear up or correct all the items associated with the transaction.
Few important items to remember at this stage of the process.
- The release of the CD is not a clear to close (CTC) some lenders will release the CD prior to the final underwrite or CTC, while others work in the opposite
- Acknowledging the CD still does not obligate you the borrower to have to close on the mortgage loan. You have no obligation to the mortgage loan until you sign all the documents at the closing table. The only except to this is with a refinance transaction where as you still have the “Three day right of recession” after the closing.
Remember if you do not understand a document or the process ask questions of your loan originator, realtor and closing agent. Never just assume your good to go.
You should also visit the CFPB website and at least read “Know Before You Owe” Your Home Loan Tool Kit.
Protect yourself, read, be informed and ask questions.