Have you ever bought or sold property and stared glossy eyes at the HUD1? The new closing disclosure called TRID will make understanding the closing process much easier. Do you love acronyms, you might want to sit down for this one… TRID which stands for the TILA / RESPA Integrated Disclosure Rule (two acronyms in one acronym) is the new ruling that states loan disclosures must be submitted to buyer at least 3 days prior to closing. Now before we go any farther let me define what TILA / RESPA is, TILA stands for Truth in Lending Act and RESPA is Real Estate Settlement Procedures Act.
Now that you have the info on what all the acronyms are you can see that TRID is a very good thing for buyers. The new ruling goes into effect on August 1, 2015 and while lenders and real estate agents scramble to get ready it’s a positive change for everyone involved. Beware though with good changes come some adjustments, deals that could close escrow faster will now be delayed by this new disclosure process. Another positive note is that along with the ruling of TRID comes the new easier to read loan estimate forms that will make understanding the documents much simpler.
What is TRID exactly?
The new more easily to real loan estimate forms come as an effort to streamline the Dodd-Frank Act which was implemented to assist buyers due to the mortgage bubble and financial crisis. The Consumer Financial Protection Bureaus (CFPB) effort will make the disclosure process a much more pleasurable experience for buyers with easier to understand paperwork and longer times to review the paperwork prior to closing. Currently there are four documents that lenders use to disclose to consumers which will be reduced to two. The two items now being used to disclose are the Loan Estimate which will replace the GFE or Good Faith Estimate and the second is the Closing Disclosure or Closing Statement which will replace the HUD1.
So what happens if a lender doesn’t comply with TRID? Let’s just begin by saying the penalties are very steep! Penalties will range depending on the actual violation from $5000 to $1 million per day for the violations. With penalties that severs it’s likely these events won’t happen anytime soon. Basically there are three tiers;
- First tier: For any violation of a law, rule, or final order or condition imposed in writing by the Bureau, a civil penalty may not exceed $5,000 for each day during which such violation or failure to pay continues.
- Second tier: For any person that recklessly engages in a violation of a Federal consumer financial law, a civil penalty may not exceed $25,000 for each day during which such violation continues.
- Third tier: For any person that knowingly violates a federal consumer financial law, a civil penalty may not exceed $1,000,000 for each day during which such violation continues. [12 U.S.C. § 5565(c)(2)]
With the new ruling in place lenders must have these documents in buyers hands three days before closing whereas now the documents can be presented in as little as one day before closing. One more item that was changed in this ruling is that the responsibility to disclose falls on the lender solely. The loan estimates can be submitted to a buyer by either the escorw company or the lender but if it doesn’t get done then it’s the lenders fault.