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TILA-RESPA INTEGRATED DISCLOSURE (TRID)

Presented by Betsy UrbanceSorling Northrup, AtttorneysIAR Legal Hotline Attorney

• Was originally scheduled to be effective August 1st

• Now, after a rule change, implementation date of October 3rd

It WILL be implemented, so it’s best to prepare NOW

TRID: Coming Soon??

Current Practice• TILA: Initial Truth in Lending and Good Faith Estimate

• RESPA: HUD-1 and Final Truth in Lending

TRID: Background

Economic Crisis• Dodd-Frank Wall Street Reform Act

• CFPB Directed to Consolidate and Improve Disclosures Related to Home Loans

• Result: TRID – 1800+ Pages of New Regulations

TRID: Background

Rules are effective October 3, 2015

• Contracts entered into prior to October 3rd will be closed using the current forms, i.e., GFE and HUD-1• Initial TILA/GFE replaced by “Loan Estimate”• Final TILA/HUD-1 replaced by “Closing Disclosure”

TRID: The Basics

What Is It?• Combination of Good Faith Estimate and Initial Truth in Lending

disclosure

• Must be delivered by hand or placed in mail within 3 BUSINESS DAYS of the application by consumer for financing…

o Business Day: If lender is open on Saturday – then count it.

• Cannot be delivered any later than 7th business day prior to consummation of loan

• Consumer has 10 days from their receipt to express intent to go forward with the loan

• Creditor cannot charge consumer for anything other than ordinary credit-check costs prior to consumers “acceptance” of the loan

• What IS and what IS NOT an “Application” matters!

TRID: Loan Estimate

“Application” Requires 6 Items• Name

• Income

• Social Security Number

• Address of Property to be Purchased

• Estimated Value of Property

• Amount of Mortgage Loan Requested

TRID: Loan Estimate

Good Faith EstimatesLoan Estimate provides a good faith estimate of the credit and closing costs for the transaction• Estimates must fall within pre-determined “tolerances,” which depend

on the type of cost incurred

• Zero Tolerance: These are items that are charged by the creditor for the creditor’s benefit or paid to an unaffiliated third party for which the borrower was not allowed to shop.

• 10% Tolerance: Charges by third party service providers – based on cumulative amount

• Consumer is permitted to shop for these service providers using a list provided by the creditor

• No Tolerance: Charged by third party service providers NOT on the list provided by the creditor (or costs not required by creditor), plus prepaid interest, property insurance premiums, and amounts placed in escrow

TRID: Loan Estimate

Revising the Loan EstimateOnly permitted in cases of “changed circumstances,” which include:

• An extraordinary event beyond the control of any of the parties or other unexpected event specific to the consumer or the transaction (i.e., natural disaster, health emergency)

• Information specific to the consumer or transaction that the creditor relied upon when providing the Loan Estimate was inaccurate or has changed (i.e., loss of job/income, appraisal value too low)

• New information specific to the consumer or transaction that the creditor did not rely upon has come to light (i.e., additional source of income)

TRID: Loan Estimate

Pre-Approval Letters Are Still Allowed

• Must contain disclaimer now

• Lenders will need to create systems to prevent disclosure by consumers of the 6 key pieces of information in order to process both Pre-Approval and Pre-Qualification letters

TRID: Loan Estimate

What Is It?• Combination of Final Truth In Lending

Disclosure and HUD-1

• Disclosure of true or actual costs associated with the financing – replaces the HUD-1

• Must be delivered 3 BUSINESS DAYS prior to the consummation

• Business Day: ALWAYS count Saturday!

TRID: Closing Disclosure

3-Day RuleCan be re-set in the following 3 circumstances:

• Change to loan’s APR

• Change to loan product itself

• Addition of pre-payment penalty

• 1-Day Review Rule• Consumer must be allowed opportunity to review revised Closing

Disclosure one day prior to closing

TRID: Closing Disclosure

Delivery• May be provided in person, by mail, or by email

• If delivered in person, considered received by consumer on day it is provided

• If mailed or delivered electronically, consumer is considered to have received it 3 business days after it is delivered or placed in the mail

o Unless creditor has evidence that consumer received it earlier

TRID: Closing Disclosure

TRID: Closing Disclosure

TRID: Closing Disclosure

TRID: Closing Disclosure

TRID: Closing Disclosure

CFPB provided the following example based on these facts:

• Loan application received by lender on October 5th

• Anticipated closing date December 30th

TRID: Example

TRID: Example

TRID: Example

There are still a lot of unanswered questions:• For instance, division of responsibilities between

settlement service providers and lenders still up in the air

• CFPB enforcement still up in the air (“flexible” enforcement?)

• Effect on number of closings and simultaneous closings, still up in the air

• Finally, effect on local contracts, still up in the air

TRID: Conclusions

Good News!• Brokers’ commissions are not directly

impacted

• Indirect impact could result from longer closing windows

• The impetus for the new rules is to make borrowing to buy a home an easier process to understand

TRID: Conclusions

New “News!”• There is still discussion at national

level about delay of enforcement – pending legislation

• Website resources• http://www.illinoisrealtor.org/respa• http://

www.realtor.org/field-guides/field-guide-to-the-tila-respa-integrated-disclosure-rule-trid

• http://www.consumerfinance.gov/know-before-you-owe/real-estate-professionals/

TRID: Conclusions