The Consumer Financial Protection Bureau (CFPB) now requires that new integrated mortgage disclosures be used when residential real estate is purchased or refinanced. These disclosures are part of the sweeping federal “Know Before You Owe” law, created under the Dodd-Frank Wall Street Reform and Consumer Protection Act. This law applies to most residential loan applications made after October 3, 2015.
What is TRID?
The new integrated mortgage disclosures are commonly called TRID (TILA-RESPA Integrated Disclosures). These disclosures combine the preliminary Truth in Lending (TIL) disclosure, the final TIL disclosure, the loan servicing disclosure, the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement into just two new forms.
What are the two new forms?
The two new forms are the Loan Estimate and the Closing Disclosure. They are designed to help consumers more easily understand important loan terms and give them a better opportunity to shop for services.
What is the Loan Estimate?
A consumer must receive the Loan Estimate within three days after making a loan application with a lending creditor. The Loan Estimate provides easy-to-read information about the interest rate, monthly payments, escrows for taxes and insurance, pre-payment penalties, adjustable rates and closing costs. It is not necessary to sign an official loan application form before receiving the Loan Estimate, as long as you’ve given the creditor the address of the property, the loan amount you are requesting, basic income information, the estimated property value, your name and your Social Security number.
Can the creditor charge me fees when I make a loan application?
No, but you may be charged for the costs to obtain a credit report. The creditor cannot collect any other fees from you until you’ve received the Loan Estimate.
What do I do after I receive the Loan Estimate?
Compare the terms on all the Loan Estimate forms you receive from different creditors so you can determine which loan is the best fit for you. Once you have decided, you will notify the chosen creditor that you intend to proceed with the loan.
What happens after I tell the creditor I want to proceed?
The creditor will begin the loan approval process, obtain a real estate appraisal and order a property title examination.
What is the Closing Disclosure form?
The Closing Disclosure tells you all the final figures and amounts for your closing, important contact information for the creditor and service providers, the interest rate, monthly principal and interest, origination charges and a calculation of the cash needed to close. The creditor must give you the Closing Disclosure at least three business days before your closing.
Must Closing Disclosure fees and charges match those on the original Loan Estimate?
Generally, yes. The creditor cannot change certain loan charges, such as the origination fee, the appraisal fee, the credit report fee, or fees for other services you cannot shop for.
What fees and charges can change?
Charges for escrows of real estate taxes and insurance, credits from the seller, and additional items discovered during a property walk-through can change as long as you receive an updated Closing Disclosure before closing. The creditor must provide new disclosures and start the service time over if there are any increases to APR (annual percentage rate), the loan product changes, or a prepayment penalty is added.
Will the new disclosures delay my closing?
It is still too early to tell. For now, most creditors recommend that purchase contracts allow approximately 45 to 60 days between loan application and closing so that creditors can comply with the new law.
Can I waive the Closing Disclosure requirement and speed up the process?
Yes, if there is a real emergency. Creditors cannot let you waive the Closing Disclosure requirement unless you meet very specific conditions.
Can the seller and my Realtor see my Closing Disclosure?
No. The Closing Disclosure contains confidential personal and non-public information about you and your loan terms. Most closing agents use a supplemental closing form (the ALTA Closing Statement, which contains all the charges and fees from your official Closing Disclosure, but omits all confidential information about you and your loan terms).
What if something changes after closing?
The creditor must give you a corrected Closing Disclosure if the original Closing Disclosure becomes inaccurate because of a change to an amount you paid, or if a clerical error is discovered. The creditor has 60 days to issue an amended Closing Disclosure and refund any overcharged fees.
Do the new integrated mortgage disclosures apply to all loans?
No. Creditors must use the new integrated mortgage disclosures for most loans used to purchase or refinance residential real estate that will be used as the consumer’s primary residence. The new disclosures are not required for home equity loans, reverse mortgage loans or loans secured by mobile homes or dwellings not attached to real estate.
This column was provided by the Ohio State Bar Association. It was prepared by Charles A. Brigham III, an attorney with the law firm of Brigham & Brigham Co. L.P.A. and an Ohio licensed title agent with Buckeye Land Title Company in Cincinnati. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.