HOME SELLER WHAT IS TRID HOME SELLER: Episode 00022

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Home Seller Trid

TRID stands for:

  • TILA (Truth In Lending Act)
  • RESPA (Real Estate Settlement Procedures Act)
  • Integrated
  • Disclosure

 

For all home buyers out there, for over 30 years, loan officers have been required to provide two documents anytime a borrower submitted a loan application. These documents are known as the Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosure (TIL).

At the time of closing, they also provided the HUD-1 Settlement Statement and the final Truth-in-Lending disclosure (TIL).

Now, the Consumer Financial Protection Bureau (CFPB) has announced the “TILA-RESPA Integrated Disclosure,” now known industry-wide as TRID. As part of the new rule, some new documents have  merged as of October 3, 2015 when this procedure was implemented.

New Timelines

The biggest change, the one that can affect you as a buyer or seller, is the new timeline. Lenders are now required to give the buyer these documents at certain times throughout the process, and if they do not, the closing must be pushed back.

Application: The GFE and TIL will be combined into a new form called the Loan Estimate, which is designed to give consumers (home buyer) a better understanding of key features, costs and risks of the mortgage for which they are applying. This form is to be provided no later than three days after application.

Closing: The HUD-1 and final TIL will be combined into the Closing Disclosure, which more clearly explains the final costs of the transaction. This form is to be provided to consumers at least three business days before the loan is consummated previously known as closing (i.e. when the prospective borrower(s) becomes contractually obligated, as defined by Regulation Z), which in most states is the same as the closing date or when the borrower(s) signs the promissory note.

TRID DISCLOSURE RULE

Exceptions

As with any government program, there are exceptions to these rules. They only apply to real estate transactions that are being funded by lenders who are considered creditors. If you make less than 5 loans in a year, you are not bound to these new regulations. They also don’t apply to HELOCs, reverse mortgages or loans secured by mobile homes or dwellings not attached to real property.

The waiting period can be waived, but only in dire financial circumstances, such as an imminent foreclosure. The borrowers must provide the lender with a dated written statement describing the emergency and specifically amending or waiving the waiting period. The statement must be signed by all parties to the contract on the buyer’s side. The waiver may not be a pre-printed statement from the lender.

How Does This Affect Investors?

So these new rules and procedures mainly affect retail buyers. Why should investors care? For buy-and-hold investors, this won’t be much of a change. It will have the most effect on flippers, who typically sell their flips to those retail home buyers.

There are very specific circumstances that can change the loan terms, which would require a new Closing Disclosure be given to the buyer, which comes with its own 3-day review period. If this happens more than 3 days before closing, your deal will probably go through as planned. But if this happens less than 3 days before closing, your deal gets thrown off.

Delayed Deadline

These new disclosures were originally set to take effect August 1, 2015, but feedback from the lending institutions has pushed the new deadline to October 3, 2015. Keep these dates in mind if you have properties on the market or coming to the market soon. Closing before October 1 could help your deal go more smoothly. For properties that are closing in the first few weeks or even months of these new changes, you could experience some delays while the closing companies work out the bugs.

If you do come across a delayed closing due to these rules, consider writing an Amendment to extend or change the date of closing. While this delay may eat up a few days, it is better than trying to find a new buyer. However, I would not ever recommend allowing the buyer to occupy your home before closing. Even for just a day. There are so many things that can go wrong with this, I couldn’t even begin to list them all.

As the lending institutions and closing companies work through these loan disclosures, expect some initial problems. But patience and understanding can go a long way to saving your deal.

Integrated loan disclosure forms and samples

Below are several, downloadable Loan Estimate and Closing Disclosure forms in both English and Spanish and samples for different loan types.
 

Loan estimate

Blank model loan estimate fields annotated to show rule citations
Blank model loan estimate form that illustrates the application of the rule’s content requirements
Blank model loan estimate that illustrates the application of the optional alternative tables for transactions without a seller
Sample of completed loan estimate for fixed rate loan
Sample of completed loan estimate for interest only, adjustable rate loan
Sample of completed loan estimate for refinance
Sample of completed loan estimate for balloon payment
Sample of completed loan estimate for negative amortization

Loan Estimate Forms En Español

Blank model loan estimate form that illustrates the application of the rule’s content requirements
Blank model loan estimate that illustrates the application of the optional alternative tables for transactions without a seller
Sample of completed loan estimate for interest only, adjustable rate loan
Sample of completed loan estimate for refinance
Sample of completed loan estimate for balloon payment
Sample of completed loan estimate for negative amortization

Closing disclosure

Blank closing disclosure with fields annotated to show rule citations
Blank closing disclosure that illustrates the application of the rule’s content requirements
Blank closing disclosure that illustrates the alternative disclosures and modifications permitted for transactions without a seller
Blank closing disclosure that illustrates disclosure provided to seller
Blank page 2 of closing disclosure that illustrates modifications to closing cost details
Sample of a completed closing disclosure for fixed rate loan (companion to sample loan estimate above)
Sample of a completed closing disclosure for refinance (companion to sample loan estimate above)
Sample of the completed closing disclosure for refinance transaction where the closing costs have increased in excess of the good faith requirements
Sample of a completed closing disclosure for refinance in which the consumer must pay additional funds to satisfy the existing mortgage loan securing the property and other existing debt to consummate the transaction
Sample page 3 of closing disclosure (summaries of transactions) for disclosure of consumer funds from a simultaneous second-lien credit transaction
Sample page 3 of closing disclosure (summaries of transactions) for disclosure of funds paid outside of closing

Closing disclosure En Español

Blank closing disclosure that illustrates the application of the rule’s content requirements
Blank closing disclosure that illustrates the alternative disclosures and modifications permitted for transactions without a seller
Sample of a completed closing disclosure for fixed rate loan (companion to sample loan estimate above)
Sample of a completed closing disclosure for refinance (companion to sample loan estimate above)

Other blank forms and samples

Blank model form for the written list of settlement service providers
Sample of written list of providers you can shop for
Sample of written list of providers you cannot shop for
Blank model form of the escrow cancellation notice

Consumer Financial Protection Bureau Consumer Resources

The CFPB has provided extensive resources for the consumer on its website, http://www.consumerfinance.gov. Here are links to some materials that may be helpful, as consumers contemplate buying a home:

Explore interest rates
Learn more about loan options
Closing checklist
Closing forms explanation

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