What Transaction Types Are Covered by the TRID Rule?

The TILA-RESPA Integrated Disclosure (TRID) Rule is a federal regulation designed to enhance consumer understanding of the financial commitments involved in mortgage transactions. It aims to provide clear and timely information to consumers before they finalize a mortgage loan. The primary objective of TRID is to foster transparency by consolidating various disclosures into two forms: the Loan Estimate and the Closing Disclosure. These documents help borrowers comprehend the costs and risks associated with their loans, empowering informed decisions throughout the mortgage process.

Transactions Subject to TRID

The TRID Rule applies to most closed-end consumer credit transactions secured by real property. A “closed-end consumer credit” transaction refers to a loan repaid over a predetermined period, intended for personal, family, or household purposes. This differentiates these loans from open-ended credit products, which have revolving credit lines.

A transaction is considered “secured by real property” when the loan uses real estate, such as a house or land, as collateral. This includes loans secured by a dwelling, which the rule defines as a residential structure containing one to four units. The property’s purpose, rather than its physical type, primarily determines TRID applicability.

Most residential mortgage loans fall under TRID’s purview, including those for home purchases and various types of refinances. Both rate-and-term refinances, which adjust the loan’s interest rate or duration, and cash-out refinances, which allow borrowers to access their home equity, are covered. Construction-to-permanent loans are also subject to TRID if they meet the core coverage requirements. These are loans that finance the initial construction of a dwelling and then convert into a permanent mortgage.

Loans secured by vacant land or parcels of 25 acres or more are included if the credit is extended for a consumer purpose, such as building a future dwelling. The rule also applies to credit extended to certain trusts established for tax or estate planning purposes. The TRID Rule applies to lenders who regularly extend consumer credit, meaning they make more than five mortgages in a calendar year.

Transactions Not Subject to TRID

While the TRID Rule covers a wide range of transactions, several specific types are exempt from its disclosure requirements. These exemptions exist because the nature or purpose of these transactions differs from the typical closed-end consumer mortgages TRID is designed to regulate.

Home Equity Lines of Credit (HELOCs) are not subject to TRID because they are open-end credit arrangements, allowing borrowers to draw and repay funds repeatedly up to a certain limit. This open-ended structure falls outside TRID’s focus on closed-end loans with fixed repayment schedules.

Loans made for business, commercial, or agricultural purposes are also exempt, as TRID specifically targets credit extended for personal, family, or household use. Reverse mortgages are another notable exemption from TRID’s disclosure forms, although they are subject to their own specific disclosure rules under federal regulations, such as 12 CFR 1026.33.

Chattel-dwelling loans, which are secured by mobile homes or other dwellings not permanently affixed to real property, are not covered by TRID. These loans finance the dwelling itself without including the underlying land.

Certain seller financing arrangements are also exempt if the seller does not meet the definition of a “creditor,” meaning they do not regularly extend consumer credit. All-cash transactions are excluded from TRID, as no loan is involved to trigger disclosure requirements. Some housing assistance loans, particularly those offered by non-profit organizations at a zero percent interest rate and with specific repayment terms, may qualify for a partial exemption from TRID disclosures.