What Is the Purpose of the TRID Rule?

The mortgage process involves numerous documents and complex financial terms, which can be challenging for consumers to understand. To address this complexity, the TILA-RESPA Integrated Disclosure (TRID) Rule was implemented. This rule aims to simplify and standardize the disclosure process for mortgage loans, providing clearer information to consumers, empowering them to make informed decisions about their home financing.

What TRID Is

TRID is a rule issued by the Consumer Financial Protection Bureau (CFPB) that became effective in October 2015. It integrated and reformed disclosures previously required under two federal laws: the Truth in Lending Act (TILA), which focused on loan terms and costs, and the Real Estate Settlement Procedures Act (RESPA), which addressed settlement costs and practices.

Before TRID, consumers often faced confusing disclosures, found it difficult to compare different loan offers, and sometimes encountered last-minute changes to their loan terms at closing. The integration of TILA and RESPA disclosures into a single, standardized format directly addresses these issues, enhancing transparency and promoting a better understanding of mortgage transactions for the consumer.

Key Disclosures Under TRID

TRID achieves its purpose through two primary documents: the Loan Estimate (LE) and the Closing Disclosure (CD). These forms are standardized to ensure consistency across lenders, making it easier for consumers to compare loan offers.

The Loan Estimate provides a good faith estimate of credit costs and transaction terms. It details the estimated interest rate, the projected monthly payment, estimated closing costs, and other loan features such as prepayment penalties or balloon payments. This document allows consumers to effectively shop for and compare various loan options, helping to prevent unexpected expenses.

The Closing Disclosure presents the final loan terms and all closing costs. It includes the final interest rate, monthly payment, and an itemized breakdown of costs for both the borrower and the seller. This disclosure enables consumers to compare the final terms against the initial Loan Estimate, ensuring they understand all financial aspects before completing the transaction.

The Loan Process and TRID

TRID’s disclosures are strategically placed within the mortgage application and closing timeline to provide consumers with adequate review periods. Lenders must provide the Loan Estimate to the consumer within three business days of receiving a loan application. A complete application includes six pieces of information:

• The consumer’s name
• Income
• Social security number
• The property address
• An estimate of the property value
• The requested loan amount

After receiving the Loan Estimate, consumers have an opportunity to shop and compare offers from different lenders. Once a consumer decides to proceed with a specific lender, they must provide an “intent to proceed” before the lender can charge most fees, with the exception of a credit report fee.

The Closing Disclosure must be provided to the consumer at least three business days before the scheduled closing date. This mandatory three-day review period allows consumers ample time to examine the final terms and ask questions. Certain significant changes to the Closing Disclosure, such as an inaccurate annual percentage rate, a change in the loan product, or the addition of a prepayment penalty, will trigger a new three-business-day waiting period before closing can occur.

Parties Involved and Their Responsibilities

Lenders bear the primary responsibility for issuing the Loan Estimate. They must ensure the accuracy of the information provided and deliver it within the required timeframe to the consumer.

Settlement agents, which include title companies and escrow agents, are responsible for preparing and delivering the Closing Disclosure. They coordinate closely with the lender and consumer to ensure all figures are accurate and delivered on time for review.

Consumers also have a role in the TRID process. It is their responsibility to compare the Loan Estimate and the Closing Disclosure for any discrepancies and to ask questions about unclear terms. Acknowledging receipt of the Closing Disclosure is also an important step in the process.