TRID: New Mortgage Disclosure Rules Take Effect

The new Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule went into effect on October 3, 2015.

If your business is not fully prepared to comply with the new disclosure requirements, time is of the essence.

TILA-REPSA Rule Compliance & TRID

Under the TRID Rule, mortgage lenders must use new forms that combine the mortgage disclosures required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA). In contrast to prior template forms, the new documents require greater customization and detailed information regarding the specific loan transaction.

The new integrated disclosures under the TRID rule apply to most closed-end consumer mortgages. The rule does not apply to home equity lines of credit (HELOCs), reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property.

The Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosure are combined into a new form, known as the Loan Estimate. These disclosures are intended to help consumers in understanding the key features, costs, and risks of the mortgage loan and must be provided to consumers no later than the third business day after they submit a loan application

The HUD-1 and final Truth-in-Lending disclosure have been combined into another new form, the Closing Disclosure. It designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction and comparing loans from different lenders. The Closing Disclosure must be provided to consumers at least three business days before consummation of the loan.

Other stipulations of TRID Rule

The TRID Rule also contains new record keeping obligations. In general, lenders must retain evidence of compliance for three years after the later of consummation or the date a disclosure is required. The final Closing Disclosure, however, must be retained for five years after loan consummation by the creditor. In addition, although the disclosures may delivered by other entities, such as mortgage brokers, lenders retains liability for ensuring that the documents are provided in accordance with the rule.

The sweeping changes mandated by the TRID Rule represent one of the most significant regulatory overhauls of the mortgage industry in decades. The new documents are very different from what banks are currently using. To implement the changes, most lenders must not only revise their forms, but also significantly amend their business processes, technology requirements, lending policies and procedures, contracts with service providers, and employee training. Accordingly, compliance not only requires careful planning, but also significant resources.