What Does TRID Mean for Your Mortgage?

The TILA-RESPA Integrated Disclosure (TRID) rule, often referred to as “Know Before You Owe,” was implemented by the Consumer Financial Protection Bureau (CFPB) to bring clarity and transparency to the mortgage loan process. This regulation aimed to make mortgage terms and costs easier to understand. It combined and streamlined disclosures from the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into two user-friendly forms. TRID protects borrowers by ensuring they receive clear, accurate information and ample time to review it before committing to a mortgage.

Core Disclosure Forms

TRID centers around two integrated disclosure forms that provide consumers with detailed information about their mortgage loan. These standardized documents allow for easier comparison between different loan offers, empowering borrowers to make informed decisions.

Loan Estimate (LE)

The Loan Estimate (LE) is provided by lenders within three business days of receiving a mortgage loan application. This document outlines the estimated interest rate, projected monthly payment, estimated total closing costs, estimated cash needed to close, and a breakdown of various fees, such as origination charges, appraisal fees, and credit report fees. It helps consumers shop for and compare different loan offers.

Closing Disclosure (CD)

The Closing Disclosure (CD) presents the final terms of the mortgage loan and the actual closing costs. Lenders are required to provide this document to the consumer at least three business days before the scheduled loan closing. The Closing Disclosure details the final interest rate, exact monthly payment, and precise cash required at closing, including the down payment and all closing costs. This form allows consumers to compare the final figures against the initial estimates provided in the Loan Estimate for full understanding before signing.

Consumer Protections and Timing Rules

TRID establishes specific rules and protections designed to safeguard consumers throughout the mortgage process, ensuring transparency and preventing unexpected changes. These rules include mandatory timing requirements for disclosures, limits on how much certain costs can change, and provisions for re-disclosure if significant loan terms are altered.

Lenders must adhere to strict timelines when providing these disclosures to allow consumers sufficient time for review. The Loan Estimate is delivered within three business days of application, providing an early overview of costs and terms. The Closing Disclosure is provided at least three business days before closing, offering a final review opportunity. This mandatory waiting period is designed to prevent last-minute surprises and provide time to ask questions or address discrepancies.

Tolerance Limits

TRID also places specific tolerance limits on how much certain fees can increase between the Loan Estimate and the Closing Disclosure. Some fees, such as the lender’s origination charges and transfer taxes, have a zero tolerance, meaning they generally cannot increase at all. Other costs, like recording fees and third-party services for which the consumer could not shop, have a 10% tolerance, allowing for a slight increase up to that percentage. Conversely, certain fees, such as prepaid interest, property insurance premiums, and services for which the consumer shopped independently, have no tolerance limits and can vary more significantly. These limits help protect consumers from unexpected cost escalations.

Re-disclosure Requirements

If significant changes occur after the initial Closing Disclosure has been issued, lenders are typically required to provide a new Closing Disclosure, which triggers a new three-business-day waiting period before closing can take place. Such changes include an increase in the annual percentage rate (APR) beyond a specified threshold, the addition of a prepayment penalty, or a change in the loan product itself. This re-disclosure requirement ensures that consumers are fully aware of any material alterations to their loan terms and have adequate time to consider them before finalizing the transaction.