What Is TRID? The Mortgage Disclosure Rule Explained

The TILA-RESPA Integrated Disclosure (TRID) rule, implemented by the Consumer Financial Protection Bureau (CFPB), reformed the mortgage lending process. It consolidates disclosure requirements previously mandated under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). TRID aims to make mortgage loan information more transparent and easier to understand. This empowers consumers to make informed financial decisions by providing clear, standardized disclosures throughout the mortgage application and closing process.

The Integrated Disclosure Forms

Central to the TRID rule are two standardized documents: the Loan Estimate and the Closing Disclosure. These forms replaced multiple older disclosures, streamlining information for consumers. Their consistent format allows for straightforward comparison of loan offers, fostering a more competitive and transparent marketplace.

The Loan Estimate (LE) serves as an initial, good-faith estimate of a loan’s terms and associated costs. Lenders must provide this three-page document to applicants. It details the estimated interest rate, projected monthly principal and interest payment, and an estimate of taxes and insurance. The LE also presents estimated closing costs, categorized into loan costs and other costs, along with the estimated cash needed to close. The form indicates whether the loan includes features like a prepayment penalty, balloon payment, or negative amortization.

Following the Loan Estimate, the Closing Disclosure (CD) provides the final statement of all loan terms and closing costs. This five-page document is delivered shortly before the closing date. It outlines the definitive interest rate, precise monthly payment, and an itemized breakdown of all closing costs, including lender charges, title fees, and prepaid items. The CD also specifies the exact cash required from the borrower at closing. Consumers should compare the Closing Disclosure with their initial Loan Estimate to identify any discrepancies.

Disclosure Timing Requirements

The TRID rule establishes specific timing requirements for delivering the Loan Estimate and Closing Disclosure. This ensures consumers have adequate time to review documents and make informed decisions. Adherence to these schedules is a primary compliance obligation for lenders.

The Loan Estimate must be provided to a borrower within three business days of the lender receiving a completed loan application. For the Loan Estimate, a “business day” is defined as any day the creditor’s offices are open for business. This definition can vary between lenders. After receiving the Loan Estimate, the consumer must provide an “intent to proceed” before the lender can charge any fees, except for a credit report fee.

The Closing Disclosure must be received by the borrower at least three business days before the scheduled closing date, also known as consummation. For the Closing Disclosure, a “business day” includes all calendar days except Sundays and federal public holidays. This mandatory three-day waiting period allows borrowers to review the final terms and costs, compare them against the Loan Estimate, and ask questions before becoming legally obligated. If mailed, an additional three business days are generally added for delivery, extending the review period to six business days before closing.

Certain changes to loan terms or costs after the initial Closing Disclosure necessitate a new disclosure and trigger another three-business-day waiting period. These changes include an increase in the annual percentage rate (APR) beyond a specified tolerance, the addition of a prepayment penalty, or a change in the loan product. A significant increase in overall closing costs exceeding established tolerance limits also requires redisclosure. These requirements can impact the closing timeline, potentially delaying the transaction to ensure consumers review updated information. A revised Loan Estimate may also be required if key information changes, such as a lower property appraisal or a change in the borrower’s credit standing.

Key Stakeholders and Their Responsibilities

Compliance with the TRID rule involves coordinated efforts from several parties in a mortgage transaction, each with distinct responsibilities. Understanding these roles helps ensure a smooth and transparent process for the consumer.

Lenders bear the primary responsibility for ensuring compliance with TRID requirements. This includes timely and accurate provision of both the Loan Estimate and the Closing Disclosure to the consumer. Lenders are accountable for calculating and disclosing all fees and charges. They must also retain records of the Loan Estimate for three years and the Closing Disclosure for five years after loan consummation.

Settlement agents, often including title companies or closing attorneys, play a significant role in preparing and delivering the Closing Disclosure. While the lender holds ultimate responsibility for the CD’s accuracy, settlement agents coordinate with the lender to gather and verify settlement costs from third parties. Their collaboration ensures all fees, particularly those for title services, government recording, and pre-paid items, are accurately reflected on the final disclosure.

Consumers also have responsibilities within the TRID framework. They should carefully review the Loan Estimate and Closing Disclosure forms, comparing the details provided on each. This review includes examining the interest rate, monthly payment, and all itemized closing costs. Consumers should ask their lender or settlement agent any questions about the disclosures to fully understand the terms and costs before proceeding.