By: Lance T. Denha, Esq.
The Consumer Financial Protection Bureau now requires that new integrated mortgage disclosures be used when residential real estate is purchased or refinanced. These disclosures were created under the Dodd-Frank Wall Street Reform and Consumer Protection Act. This law applies to most residential loan applications made after Oct. 3, 2015.
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. The two new forms are the Loan Estimate and the Closing Disclosure. They are designed to help consumers more easily understand important loan terms.
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.
Always remember the mortgage loan origination, mortgage broker or lender must never charge you any upfront fees other than the cost of obtaining a credit report prior to receiving the loan estimate. Upon receiving the Loan Estimate, the consumer can now determine what the best route is for their personal situation by comparing the rates and terms and advising the creditor which they feel is best suited for their needs. They will also receive the Homekit Tools necessary to make the best determination possible moving forward. At that point upon notifying the creditor, they can then move forward with ordering an appraisal as well as a property title examination order.
As far as the Closing Disclosure form, this form provides the consumer all the final figures and amounts for the 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 consumer the Closing Disclosure at least three business days before your closing. After delivery of the Closing Disclosure to the buyer/borrower, the following changes may likely trigger a new three day waiting period (i.e closing date delay)
- Any changes that would impact the Annual Percentage Rate on the loan, including likely, changes in seller paid closing costs, credits, commission credits, etc.;
- Changes in homeowners insurance, taxes, PMI or other similar items;
- Buyer changes his/her loan terms (loan amount, rate, escrows, terms);
- If a prepayment penalty is added to the loan;
- Changes and adjustments affecting the value of the property may trigger additional disclosure and review periods.
These new TRID laws may make it difficult to close the loan within 30 days as was sometimes customary. To keep pace with closing estimated time frames, it is vital to communicate with all parties involved in the transaction and respond promptly with the lenders request.