The Consumer Financial Protection Bureau (CFPB) rolled out its new mortgage borrower protection rule this week, TRID, or the TILA-RESPA Integrated Disclosure. TRID does exactly what it says it will do; it essentially integrates two forms created separately under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA) and streamlines them into one three-page document.
The two older documents, while intended to inform borrowers, contained conflicting language, and caused unnecessary confusion. The new form, called the Loan Estimate, is supposed to make everything clear to borrowers about what lies ahead, including closing costs, monthly payments, the potential for rate increases, and also warns consumers about penalties that could arise due to things like paying down your mortgage early.
There is a second component to the new disclosure requirements, the Closing Estimate, which is also a result of the combining two older documents. It has been created with a similar goal to that of the Loan Estimate: to inform and educate borrowers in a clear and plain way about the large debt they are about to take on. The Closing Estimate requirements state that it must be presented to the borrowers at least 3 days before they close on their home loan. In the past, borrowers often did not receive this information until about one day ahead of signing, making it difficult to catch and fix errors.
It sounds as though there is very little downside to these new disclosure rules; however, there are concerns that implementing this new process will slow down the closure period for home buyers, at least initially, while all the different parties involved in the process of seeing a home loan from application to closing get their bearings. In the end though, consumers should find that they are better equipped with the knowledge they need to make wise decisions before they commit to a 30-year mortgage, and the hope is that a well-educated consumer base will prevent future financial disasters.
For more information, or to start a mortgage loan application, visit goldenstatemortgage.com.
Ian Salisbury, Time.com, “How Getting a Mortgage Is About to Change.”
Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure Rule: Small Entity Compliance Guide.