What Is TRID in Mortgage and How Does It Work?

The TILA-RESPA Integrated Disclosure (TRID) rule represents a significant reform in the residential mortgage lending landscape. This regulation was established to enhance transparency and improve consumer understanding throughout the mortgage transaction process. It achieved this by integrating and replacing several older disclosure forms from the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The overarching goal of TRID is to simplify the mortgage experience for consumers, providing clear information from application through closing.

Understanding TRID

TRID is a comprehensive rule issued by the Consumer Financial Protection Bureau (CFPB), designed to streamline and clarify the mortgage process for consumers. Its primary aim is to ensure borrowers receive straightforward and timely information about their loan terms and costs.

The rule applies to most closed-end consumer credit transactions secured by real property. This scope includes conventional mortgages for home purchases, refinancing existing loans, and construction-only loans.

Exclusions cover Home Equity Lines of Credit (HELOCs), reverse mortgages, and loans for chattel-dwellings, such as mobile homes not permanently affixed to real estate. Certain business-purpose loans and loans made by creditors who originate five or fewer mortgages in a calendar year are exempt from TRID requirements. TRID standardizes disclosures to facilitate comparison shopping among lenders.

Core TRID Disclosures

The TRID rule centers around two primary integrated disclosure forms: the Loan Estimate (LE) and the Closing Disclosure (CD). These documents provide clear, comparable information to borrowers.

The Loan Estimate (LE) is a three-page document provided early in the process, serving as a good-faith estimate of the loan terms and closing costs. It details the loan amount, interest rate, and the estimated monthly payment. The LE also includes estimated cash to close, a breakdown of estimated closing costs (including lender fees, services from third parties, taxes, and insurance), and a comparison table for the interest rate, monthly principal and interest, and total interest paid over the loan’s life. This standardized format allows borrowers to easily compare loan offers from different lenders.

The Closing Disclosure (CD) serves as the final statement of all loan terms and closing costs. This five-page document provides a detailed itemization of all closing costs, the final cash to close, and a summary of transactions for both the borrower and seller. It also includes details about escrow accounts. The CD ensures borrowers can compare the final costs and terms against the initial Loan Estimate.

Key TRID Rules and Borrower Protections

The TRID rule establishes specific timelines and accuracy requirements for the delivery of these disclosures, aiming to protect borrowers by giving them sufficient time to review and understand their loan terms. Lenders are required to provide the Loan Estimate to the borrower within three business days after receiving a mortgage application. For TRID purposes, a complete mortgage application consists of six specific pieces of information: the consumer’s name, income, Social Security number, the property address, an estimate of the property’s value, and the desired loan amount.

The Closing Disclosure must be provided to the borrower at least three business days before “consummation.” Consummation refers to the point when the consumer becomes contractually obligated on the loan, typically when the borrower signs the promissory note. A new three-business-day waiting period is triggered if certain significant changes occur after the CD has been issued. These critical changes include a change to the Annual Percentage Rate (APR) beyond a specified tolerance, a change in the loan product, or the addition of a prepayment penalty.

TRID also incorporates “tolerance” limits, which dictate how much certain closing costs are permitted to change between the Loan Estimate and the Closing Disclosure without requiring a new disclosure or a refund. Costs categorized under “zero tolerance” cannot increase at all, encompassing lender fees, origination charges, and transfer taxes. “Ten percent tolerance” applies to costs like recording fees and third-party services for which the borrower cannot shop, where the total increase for these items cannot exceed 10%. Finally, “no tolerance” items, such as prepaid interest and property insurance premiums, can change by any amount. If a tolerance violation occurs, the lender is required to refund the excess amount to the borrower as a “cure.”