Most people who buy homes will remember one thing about the experience – the paperwork. Seriously, you get major hand cramps just signing all those title and loan documents. Trying to understand all those documents? Even worse.
Well, here comes TRID to the rescue – sort of. TRID stands for TILA-RESPA Integrated Disclosures. These new disclosure documents are, for the most part, replacing the old disclosures. We say “for the most part” because TRID does not apply to home equity loans, reverse mortgages, and mortgages for mobile homes or other dwellings that are not actually attached to real property. TRID will apply to most other real estate loans, including Fanny Mae, Freddie Mac, VA, FHA, USDA and other government-backed and conventional loans. TRID will even apply to private money loans and some owner-financed transactions.
The new TRID Loan Estimate form replaces the initial Truth in Lending Disclosure & Good Faith Estimate. The new TRID Closing Disclosure form replaces the final Truth in Lending disclosure & HUD-1 Settlement Statement. These forms contain much of the same information as the old ones but lays it out differently so it is easier to digest.
Some information, however, is new, like the Total Interest Percentage on the Loan Estimate Disclosure Form which discloses the total interest paid during the term of the loan expressed as a percentage of the amount loaned. Other new information provided on the Loan Estimate Disclosure Form will be: homeowners insurance, homeowners association fees, property taxes, late payment penalties, and whom will service the loan. This added information is designed to give borrowers a better idea of what their monthly payment will be and how much cash they need to bring to the table at closing.
The second form, the Closing Disclosure, is required to show various terms of the transaction and costs. Additionally, the Closing Disclosure will no longer be prepared by the title company. Instead, the lender will be directly responsible for providing this, making the lenders take ownership of the accuracy of this form.
Besides the information provided in the new forms, the timing that they are provided to the consumer is important. Under the new rules enacted by the Consumer Financial Protection Bureau which created the new forms, the Loan Estimate Disclosure Form must be provided to the borrower(s) within three days after an application is filed (keeping in mind that even what constitutes an “application” is defined). After the Loan Estimate Disclosure Form is provided, a waiting period of seven days begins to run. The borrower(s) are not permitted to sign the loan documents until after this seven day waiting period has expired. The Closing Disclosure also has a timing element to it requiring that the forms must be provided at least three business days before the borrower can sign the final financing documents. The rationale behind this timing requirements is to permit the borrower sufficient time to review the documents, and even shop around for better terms. It also negates signing documents in a rush to meet a closing deadline as often happened before the new rules.
TRID became effective as of October 3, 2016 for loan applications submitted on or after that date. Any transactions that were initiated before October 3, 2016 will still utilize the same documents as before. Because of the new rules and forms, it is possible that closings might take a bit longer until everyone becomes more familiar with them. However, this seems like a good trade-off which will permit the consumer to be better informed throughout the home-buying process.
Purchasing a home is often a consumer’s biggest purchase and can be complex. Platt & Westby, P.C. routinely assists clients in reviewing their real estate documents and guiding people through real estate transactions, and we have been doing this since 1973. Platt & Westby has convenient offices in mid-town Phoenix, Glendale/Sun City, Avondale, Scottsdale, and Gilbert. Call us for a no charge initial consultation.