Planning to Purchase or Refinance Your Home?
Make sure you understand the “Know Before You Owe” (TRID) initiative.
By now some of you may have heard your realtor or lender mention TRID (TILA RESPA Integrated Disclosures). These new rules went into effect on October 3, 2015 as part of the “Know Before You Owe” initiative of the Consumer Financial Protection Bureau (CFPB). The CFPB is an independent agency of the US government that was established under The Dodd-Frank Wall Street Reform and Consumer Protection Act that was passed in 2010 as a legislative response to the financial crisis of 2007–08 and the subsequent Great Recession.
The TRID rule is designed to protect consumers throughout the mortgage process, from understanding their loan options and picking the option that best suits them, to avoiding the usual last-minute surprises at the closing table. This new rule offers three specific benefits for borrowers.
First, it replaces four existing disclosure forms with two new ones, the Loan Estimate and the Closing Disclosure forms. The previous disclosure forms had overlapping information and complicated terms. The new forms are designed to make it easier for consumers to understand the costs associated with a mortgage.
Second, the lenders are now required to provide the Loan Estimate (LE) to the borrower within 3 business days after the application is submitted. This allows the borrowers to confirm right away the terms of the mortgage and determine if it is the right option for them.
The third and biggest change is that at least 3 business days before the closing, lenders must provide the Closing Disclosure (CD - it combines elements of the old HUD-1 Settlement Statement and the old Truth in Lending Disclosure) to the borrower, and borrower must acknowledge receipt at least 3 business days prior to closing. Failure to do so would result in a delayed closing.
This timing for the CD is a significant change from a borrower’s perspective, as it allows the borrower an opportunity to review the final numbers and ask questions ahead of the closing, without the pressure one typically feels at the closing table.
On the flip side, these changes also place an additional responsibility on the borrowers to be diligent in reviewing and finalizing their loan terms when they first receive the Loan Estimate (LE) from the lender. This is the best time in the loan process to carefully review and make any changes that you wish to make to your loan terms.
You can ensure a smooth loan process by paying attention to a few things:
• Interview lenders and get prequalified up front. When trying to decide on a lender, don’t just look at their rates and fees but also inquire how familiar they are with the new process.
• Once finalized, stay in close contact with your lender and provide any requested documentation as soon as possible
• Make sure your agent provides you detailed information about property taxes, homeowner’s association fees/condominium association fees. Your lender will need these details early in the process.
The new rules may seem intimidating at first, but they are meant to simplify and standardize the mortgage shopping process. Whether you are buying a property or selling one, it is critical that you ask your realtor and mortgage lender about how well they understand the new process. Maintaining an open line of communication with your lender will ensure that you can take maximum advantage of the new TRID rules and have a smooth closing.
Shachi Bhardwaj is a senior mortgage banker at BankSouth Mortgage in Milton, Georgia.
| Moneywise is hosted by Rajesh Jyotishi with Shalin Financial Services, Inc. Rajesh Jyotishi is a registered representative of Dempsey, Lord, Smith, L.L.C., which is a registered broker-dealer and a member of FINRA/SIPC. Advisory Services are offered through Dempsey, Lord, Smith Investment Advisory. Rajesh has been a resident of Atlanta since 1975 and in the financial services industry since 1991. For questions, he can be reached at 770-884-8175 or at RJ@shalinfinancial.com. |
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