Being in the lending marketplace requires an awareness of all the regulatory rules and evolving information in the industry, and this summer is no exception. The most important issue on the mortgage landscape this summer is the TRID or the TILA-RESPA Integrated Disclosure. The basic purpose of this rule is to roll together four currently existing disclosures under one umbrella.
Previously, TILA and RESPA disclosures may have been separate, but this new rule requires that all four disclosures for closed-end credit transactions be consolidated into two primary forms, if those transactions are secured through real property. This applies to closing documents and loan estimate documents. The change in rule is driven by the need to introduce more transparency to the lenders’ disclosures documents and help consumers better understand the key features, costs and risks of the mortgage loan.
New Rules: The Basics
Under this new rule, the Loan Estimate document has to be delivered or put into the mail no more than three business days after the client’s application has been received. In addition, the Closing Disclosure has to be given to that consumer a minimum of three days before consummation.
What Transactions Fall Under This Rule?
This rule applies to the majority of closed-end consumer credit transactions involving real secured property. That being said, however, some loan categories are exempted from this rule. These new requirements, for example, do not apply to transactions involving a Home Equity Line of Credit (HELOCs), dwellings that are not attached to feel property, or reverse mortgages that are secured by a mobile home.
Implementation and Effective Date
The new integrated disclosure deadlines must be provided beginning on August 1, 2015 by any mortgage broker or creditor after receiving an application from a consumer for a credit line. This does not exempt creditors or lenders from skipping over any other regular forms they would normally use in this process, such as the HUD-1, Truth in Lending, and the GFE, so long as the applications for a loan has been received prior to August 1st. once this date passes, however, those applications are no longer relevant.
Reactions to the Rule
So far, experts agree that these changes will impact the way lenders process real estate transactions. These rule changes may also impact home buyers who rely on finance as compared to individuals who are in a position to pay for the purchase in cash. Experts in the industry expect that this new rule could add at least one week to the closing period, since the loan estimate has to be given a minimum of three days prior to the closing rather than at the actual closing process.
What does all this mean for lenders’?
The change in rules means shifting away from the set of forms which lenders’ are so used to and adapting to a new set of variations. For instance, the Loan Estimate, which now comes in place of the Good Faith Estimate, runs into a three-page disclosure with each section of the Loan Terms Table requiring important details about increases and adjustments made during the tenure of the loan.
So what should lenders do now? Have a better understanding of the variability in the disclosures, so that they can educate consumers on what best suits their needs. To build their understanding, they need to practice the new disclosures under different lending scenarios. You can rely on us here at Expert Mortgage to help you manage this transition. We have extensive experience in handling the entire disclosure process including re-disclosures. We ensure disclosures are sent on time by tracking each files in queue and sending reminders to respective parties.
We are always committed to providing our clients with the highest level of service, including new ways to acquaint you with the new disclosures and processes which constitute the TRID regulation. To learn more about how we can help you with this transition, contact us.