TRID is an acronym for the TILA-RESPA Integrated Disclosure rule. TRID became law as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Sections 1098 and 1100A of Dodd-Frank required the appropriate rulemaking agency to publish revised forms and rules that require the mortgage industry to combine the disclosure information that consumers receive when they apply for and close on a mortgage under the Truth in Lending Act (TILA) with the settlement disclosures under the Real Estate Settlement Procedures Act (RESPA).
The Consumer Financial Protection Bureau (known more familiarly as the CFPB) has rulemaking authority over TRID. On November 20, 2013, CFPB released 1,900 pages that comprised the final rule on TRID. The rule was effective for mortgage applications received on and after August 15, 2015.
There's another proposed rule due out in April 2017 that will clarify a few issues. When the CFPB's comment period on the new proposed rule closed in October 2016, they had received 1500 comments.
The final rule mandates two disclosure forms:
The Loan Estimate provides a summary of estimated loan terms, loan and closing costs, and disclosures. As its name implies, the Closing Disclosure provides a summary of the actual loan terms, loan and closing costs, and other disclosures.
Compliance with the TRID rules and CFPB regulations is a major challenge for the mortgage industry. The final rule applies to most closed-end mortgages but does not apply to mobile home mortgages, home equity lines of credit, reverse mortgages, or to creditors who close five or fewer loans in a year. That last is the final rule's only exception for small creditors.
The final rule also made significant changes to RESPA and TILA, which are outside the scope of this post.
The biggest change for consumers is that, under the new rules, they will receive closing information at least 3 days before their settlement date. That change gives them more time to review and understand the financial disclosures before they go to settlement. If they do not understand something on the disclosure forms, they will have ample opportunity to ask questions before the big event.
The biggest change for the mortgage industry is that the lender now is responsible to prepare the consumer's settlement forms. In the past, the title company completed the HUD forms and gave them to the lender for review, but the responsibility for the disclosure forms was always with the title company. This change disrupts mortgage companies’ internal processes as loan officers struggle to absorb this responsibility into their procedures. The change in rules will require new deadlines for the new forms.
CFPB anticipates that new rules will make settlements run more smoothly and that fewer errors will occur.
The new disclosure forms are not the only changes to the mortgage process. The final rule changes the application definition, tightens the ability to increase costs throughout the mortgage process, and adds the three-day waiting period that runs from the date the consumer receives the disclosure information up until the settlement date. If the lender modifies the disclosure information, then another three-day waiting period applies before the consumer can go to settlement.
As you can imagine, these disruptions and system modifications are expensive, and the consumer will ultimately bear the brunt of these costs.
It is unclear how these government entities will address TRID. If they take a conservative approach to their quality procedures, and repurchase and claims procedures, the disruption may cause a sizeable market upheaval.
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