What is TRID and How Does it Apply to My Loan?
In the world of finance there seem to be a lot of acronyms because, well, let’s face it, it would take much longer to go through paperwork if having to use the long versions! Just because we use the acronyms and understand what they all mean, doesn’t mean we expect you to as well! After all, you have enough stuff to remember in your personal life instead of wondering what TILA and RESPA mean. Thank goodness you are in good hands when you come to First Ohio. We fill you in on every detail and explain all of those acronyms to you and what they mean!
One of the acronyms in home finance industry that you may have heard about is TRID or the TILA RESPA Integrated Disclosure Rule. Breaking it down further it means, Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). Have we lost you yet? Stay with us! Now you see why the simple TRID works just fine when discussing this. As you can see it is essentially consolidates four existing disclosures into two new disclosure forms known as the Loan Estimate (LE) and the Closing Disclosure (CD). The current documents have been around for about 40 years and it is time that they are made more current!
The first new disclosure form is the the Loan Estimate, or LE form, which contains details such as the loan term and projected payment must be put in the mail and sent to the consumers who apply for mortgages no later than the third business day after receiving their application. An application is triggered when the lender receives six key pieces of information,
- Consumer’s name
- Consumer’s income
- Consumers SSN (to obtain a credit report)
- Property address
- Estimated property value
- Loan amount
If the consumer wishes to proceed with the application they must respond before 10 business days or else the LE expires. The other new disclosure form is the Closing Disclosure, or CD, which details all of the closing costs and the total payments and finance charges associated with the mortgage. The CD must be provided to the consumer within three business days prior to signing the loan documents. If certain changes occur, such as interest rate increase, a prepayment penalty is added or the borrower switches loan programs the three-day window starts over again.
This new waiting period gives potential home-buyers a “cooling off” period to review their loan costs and all the details before moving forward and signing their loan documents. The LE and CD documents make it easier to compare estimate and final costs as opposed to getting lost in all the paperwork that looks completely different. This should help borrowers to better understand what they’re being charged and why. While some in the industry worry that this could delay loan closings, lenders can simply adjust their processing system in order to keep the loan closings expeditious.
TRID was supposed to go ‘live’ by the 1st of August this year but some administrative reasons have caused it to be delayed until October 1st, 2015. If you start your home search after October 1st you can expect to see these new changes taking place. If you have any questions about obtaining a mortgage with First Ohio and would like a quick quote or would just like a little more information feel free to contact us here!
