What Does TRID Stand For in Real Estate?

TRID stands for TILA-RESPA Integrated Disclosure, a set of regulations implemented by the Consumer Financial Protection Bureau (CFPB). These guidelines were established to improve the transparency and understanding of mortgage loan costs and terms for consumers.

Understanding the Key Disclosures

The TRID rule mandates the use of two standardized forms: the Loan Estimate and the Closing Disclosure. These documents replaced several older forms, including the Good Faith Estimate, the initial Truth-in-Lending Disclosure, and the HUD-1 Settlement Statement, aiming to simplify the mortgage process for consumers.

The Loan Estimate (LE) is a three-page document provided to consumers after they apply for a mortgage. Its purpose is to offer an estimate of the loan costs and terms the borrower is likely to receive, acting as a tool for comparing loan offers from different lenders. Key information found on the LE includes the estimated interest rate, projected monthly payments, estimated closing costs, and the estimated cash needed to close the transaction. This document also outlines specific loan terms, such as whether the interest rate can change or if there are prepayment penalties.

Following the Loan Estimate, the Closing Disclosure (CD) is a five-page form that provides the final, actual costs and terms of the mortgage transaction. It details the final interest rate, the actual monthly payment, and the precise closing costs. The CD also includes a comprehensive breakdown of all transaction costs for both the borrower and the seller. This document allows consumers to compare the estimated costs from the Loan Estimate against the final, confirmed figures, highlighting any differences.

Important Timelines and Protections

TRID regulations include specific timelines and protections designed to give consumers ample opportunity to review and understand their mortgage terms. The Loan Estimate must be provided to the consumer within three business days of the lender receiving a complete loan application. This initial disclosure allows borrowers to shop for and compare different loan offers without being charged any fees, other than a reasonable cost for a credit report, before indicating their intent to proceed.

The Closing Disclosure must be provided to the consumer at least three business days before loan consummation, which is the signing of the final loan documents. This mandatory three-business-day waiting period allows borrowers to thoroughly review the final terms and costs, comparing them to the initial Loan Estimate. This timeframe helps prevent last-minute surprises.

Certain changes to the Closing Disclosure can trigger a new three-business-day waiting period, ensuring consumers are informed of significant modifications. These changes include an increase in the annual percentage rate (APR) beyond a specific tolerance, the addition of a prepayment penalty, or a change in the loan product type. For example, if a fixed-rate loan’s APR increases by more than 1/8 of a percent, or an adjustable-rate loan’s APR increases by more than 1/4 of a percent, a new waiting period is required. For other changes, a corrected Closing Disclosure must be provided at or before consummation, but a new waiting period is not necessarily triggered.

TRID also incorporates tolerance limits for fees, which dictate how much certain charges can change between the Loan Estimate and the Closing Disclosure. Some fees, such as transfer taxes and charges paid to the lender or an affiliate, have a zero tolerance, meaning they cannot increase at all. Other fees, like those for third-party services that the borrower can shop for, have a 10% cumulative tolerance, allowing for a collective increase of up to 10% from the estimated amount. Fees such as prepaid interest, property insurance premiums, and amounts placed into escrow typically have no tolerance limits, meaning they can increase without restriction, provided the initial estimate was based on the best available information.

Who These Rules Apply To

The TRID rules apply broadly to most closed-end consumer credit transactions secured by real property. This encompasses a range of common mortgage types, including standard purchase money mortgages, refinancing transactions, and construction-to-permanent loans.

However, certain types of transactions are specifically excluded from TRID requirements due to their distinct nature or existing regulatory frameworks. These include Home Equity Lines of Credit (HELOCs), which are revolving lines of credit, and reverse mortgages. Loans for commercial or agricultural purposes are also not subject to TRID, as these fall outside the scope of consumer protection for residential mortgages. Additionally, loans made by creditors who originate five or fewer mortgages in a calendar year, such as certain instances of seller financing, may be exempt from TRID. Loans secured by mobile homes or dwellings not permanently attached to real property are typically excluded as well.