“Know Before You Owe” Mortgage Rules Coming Soon....

“TRID”  is the less intimidating name for TILA-RESPA Integrated Disclosure Rule which will go into effect October 1, 2015.   This change in the regulations means new forms for mortgage professionals, real estate agents and consumers.   “TILA” or Truth in Lending Act and “RESPA” or Real Estate Settlement Procedure Act of 1974 are the two forms lenders must share with the borrower shortly before or at the time of closing the loan.   The intention of the original Act was to make the process less confusing, but the need enact a new law (TRID) would indicate that wasn’t always the case for consumers  TRID is a chance to correct past mistakes.

Everyone is aware that there are more stringent lending standards in place since 2008 to help consumers not get in over their head when applying for a mortgage.  My first impression of TRID is that it is meant to S-L-O-W down the process.   Certain construction loans, raw land, and “bridge” loans will be subject to TRID, but were previously exempt from required waiting periods from RESPA.  (Bridge loans are used to finance the purchase of a new home using funds from an existing home sale) Expect a longer mortgage cycle for these types of loan after August 1st. 

What exactly is slowing down the loan process? At the start of the mortgage application, there are new forms, such as the Loan Estimate form which will be provided to borrowers no later than three business days after they submit a loan application.   Clearer language and design will make it easier for the borrower to read and truly understand all the costs of the loan. In theory, this requirement will give borrowers more time to examine the costs of the transaction and confirm they truly want to move ahead with the transaction.  In addition to paperwork, the last update to the law (RESPA and TILA) required lenders to also provide applicants with a list of certified homeownership counselors if they are proceeding with a high-cost mortgage.  Realtors will need to wait a longer time period to hear back if a loan was approved for their buyers because of this new waiting period.

Also under the new rules, the borrower must receive the Closing Disclosure no later than three days prior to the date the note is signed aka “closing”.  In the past, the borrower might receive this paperwork the day prior or even the morning of settlement.  TRID will in essence, push the rush for documents from the day prior to closing to three days prior. The rush will be on the folks involved with the closing, not the borrower.   Realtors will have to be familiar with these forms which are replacing HUD-1 and Truth in Lending Disclosures. Working closely with a Mortgage Broker you trust will make sure your closing go smoothly and all required paperwork is sent at the required time interval.