What Disclosures Are Required for TRID Loans at Origination?
Understand the essential disclosures required for TRID loans at origination to confidently navigate your mortgage application process.
The TILA-RESPA Integrated Disclosure (TRID) rules, implemented by the Consumer Financial Protection Bureau (CFPB), govern most closed-end residential mortgage loans. These regulations aim to enhance transparency for consumers as they navigate the complex mortgage application process. By standardizing the disclosures provided at the outset, TRID helps individuals understand the terms and costs associated with their loan.
Key Disclosures Provided at Application
When applying for a mortgage loan subject to TRID rules, consumers receive several important disclosures early in the process. These documents are designed to provide a comprehensive overview of the loan’s terms, projected payments, and associated costs. The initial disclosures allow consumers to compare loan offers from different lenders effectively. They also help applicants understand the financial commitments involved before proceeding with the loan.
Most of these initial disclosures must be provided within three business days of a lender receiving a loan application. The primary document received at this stage is the Loan Estimate, which details the core financial aspects of the proposed mortgage. Other disclosures, such as the Home Loan Toolkit and the Affiliated Business Arrangement Disclosure, offer additional context and consumer protections.
Understanding the Loan Estimate
The Loan Estimate (LE) is a standardized, three-page form. Its purpose is to present clear information about the loan’s terms, projected monthly payments, and estimated closing costs. Lenders are required to provide this document to applicants within three business days of receiving a loan application.
The first page of the Loan Estimate outlines the estimated interest rate, the loan amount, and the monthly principal and interest payment. This page also includes the projected total monthly payment, which incorporates estimated taxes and insurance. Additionally, it shows the estimated cash to close, representing the total funds needed at settlement, including the down payment and closing costs.
The second page of the Loan Estimate details the loan costs and other associated expenses. Loan Costs are further categorized into Origination Charges, Services You Cannot Shop For, and Services You Can Shop For. The distinction between shoppable and non-shoppable services is important because it indicates which services a borrower can seek out from other providers to potentially save money. Other Costs may include taxes, government fees, prepaid items like homeowners insurance, and amounts deposited into an escrow account.
The third page of the Loan Estimate offers comparisons and other important considerations. The “Comparisons” section helps consumers evaluate the loan’s long-term implications, such as the total paid in principal, interest, mortgage insurance, and loan costs over five years, and the amount of principal paid off during that period. This page also displays the Annual Percentage Rate (APR) and the Total Interest Percentage (TIP). “Other Considerations” provides details on aspects like appraisal rights, assumption policies, late payment penalties, and whether the loan’s servicing may be transferred.
Other Important Initial Disclosures
Beyond the Loan Estimate, several other disclosures are provided at or shortly after the mortgage application. These documents address various aspects of the loan process, from educational resources to potential business relationships.
The Home Loan Toolkit, titled “Your Home Loan Toolkit: A Step-by-Step Guide,” is an educational resource designed to help consumers understand the home-buying process. It covers topics such as understanding closing costs, different loan types, and general financial planning for homeownership. Lenders must provide this toolkit to applicants for most purchase transactions within three business days of receiving a completed loan application.
The Affiliated Business Arrangement (AfBA) Disclosure informs consumers if their lender or loan originator has an ownership interest in other service providers involved in the transaction, such as a title company or appraiser. This disclosure aims to notify borrowers of potential conflicts of interest and their right to choose alternative service providers. It must be provided to the consumer at or before the time of any referral to an affiliated business.
A Servicing Disclosure Statement informs the consumer whether the lender intends to service the loan themselves or transfer the servicing rights to another company. This document clarifies who the borrower will make their mortgage payments to in the future. Lenders are required to provide this statement within three business days of receiving the loan application.
The Appraisal Notice, also known as the Right to Receive Appraisal, informs consumers of their right to receive a copy of any written appraisal or valuation developed in connection with their loan application. This notice must be provided within three business days of receiving a covered application. The appraisal itself must be provided promptly upon completion or, at the latest, three business days before the loan closing, whichever occurs earlier.