Home Buyer TRID FAQ’s

    Important Home Buyer TRID FAQ’s

    Prepared EXCLUSIVELY by the Zebaida Group for our buyers to help you better understand how recent federal regulations requiring mandatory review periods for mortgage disclosure review may affect your home buying process.

    Due to federal regulations that took effect on October 3rd, 2015 from the Consumer Financial Protection Bureau (CFPB), disclosures given to consumers may be different than in the past. The Good Faith Estimate and Truth in Lending disclosure have now been merged into a new disclosure called the Loan Estimate. The HUD-1 Settlement Statement and final Truth in Lending disclosure given at closing have now been merged into a new disclosure called the Closing Disclosure. Another change that is a part of this regulation is that home buyers who obtain a mortgage are now required to be given a minimum review period after receiving both the Loan Estimate and the Closing Disclosure before they are allowed to consummate the transaction and close on their new home. Please read this FAQ to familiarize yourself with what has changed and what to expect from these changes to help avoid delays in closing.

    From the CFPB’s “What the new simplified mortgage disclosures mean for consumers”

    “Mortgages are complex transactions that may include risky features, so we’ve issued a rule that will simplify and improve disclosure forms for mortgage transactions. Consumers currently receive different, but overlapping federal disclosure forms with the terms and costs of mortgage loans. Because these forms are confusing for many people, Congress directed the Bureau to create new forms. The rule replaces the current forms with two new forms: the Loan Estimate, given three business days after application, and the Closing Disclosure, given three business days before closing. Lenders will be required to give consumers these forms for mortgage applications submitted on or after October 3, 2015. Specific benefits of the new forms and rules include:

    • Combining several forms and additional statutory disclosure requirements into two forms. This will reduce paperwork and consumer confusion.
    • Using clear language and design that will help consumers understand complicated mortgage loan and real estate transactions.
    • Highlighting the information that has proven to be most important to consumers. On the new forms, the interest rate, monthly payments, and the total closing costs will be clearly presented on the first page. This will make it easier for consumers to compare mortgage loans and choose the one that is right for them.
    • Providing more information about the costs of taxes and insurance and how the interest rate and payments may change in the future. This information will help consumers decide whether they can afford the mortgage loan and the home, now and in the future.
    • Warning consumers about features they may want to avoid, like penalties for paying off the loan early or increases to the mortgage loan balance even if payments are made on time.
    • Making the cost estimates consumers receive for services required to close a mortgage loan more reliable, for example, appraisal or pest inspection fees. The rule prohibits increases in charges from lenders, their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies. Examples of the specific exceptions include when information provided by a consumer at application was inaccurate or becomes inaccurate, or when the consumer asks for a change in the services.
    • Requiring that consumers receive the Closing Disclosure at least three business days before closing on the mortgage loan. Currently, consumers often receive this information at closing or shortly before closing. This additional time will allow consumers to compare the final terms and costs to the terms and costs they received in the estimate. That will better equip them to raise any questions before they go to the closing table.”

    NEW REGULATION FAQs

    Q: Why are lenders requiring changes to the disclosures?
    A: Lenders are not the ones that are requiring the changes, nor are lenders requiring the new timeline requirements to allow a borrower to review the Closing Disclosure before they can consummate their transaction. These changes were required as part of the Dodd-Frank Act of 2010 and are being implemented by the Consumer Financial Protection Bureau (CFPB).

    Q: When did these new changes take effect?
    A: The new regulations took effect on all applications received on or after October 3rd, 2015. If you had an application in with your lender before that date, you will continue to use the old forms and old rules and the new timeline requirements don’t apply.

    Q: Will these changes apply to my transaction?
    A: The regulations apply to most closed-end mortgages, but not to HELOCs (home equity lines of credit), reverse mortgages, or chattel-dwellings like mobile homes (not attached to real property). Those transactions will still use the old forms and follow the old rules.

    Q: What are the new forms?
    A: There are two new forms – the Loan Estimate, and the Closing Disclosure.

    The Loan Estimate, or LE, integrates and replaces the Good Faith Estimate and the Truth in Lending disclosure. The LE is given to a consumer within 3 business days of application, and a transaction cannot close for at least 7 business days after the consumer has received the LE.

    The Closing Disclosure, or CD, integrates and replaces the HUD-1 Settlement Statement and the final Truth in Lending Disclosure. The CD must be received by the consumer at least 3 days before consummation (signing the mortgage documents and closing, commonly referred to as closing, signing, or escrow in different parts of the country). If given in person, the CD is considered received that day. If it is mailed or delivered electronically, the consumer is considered to have received it after three business days or upon evidence by the lender that it has been received (generally acknowledgement that it has been received or timestamps of receipt).

    The new requirements for you to have 3 business days to review your Closing Disclosure before consummation of the transaction could cause unexpected delays at closing. Be sure to work closely with your lender to ensure all details are handled in time to close on your expected date.

    Q: When will I receive my Loan Estimate form?
    A: Once you have provided a lender with your name, income, social security number, a property address (not your current address, but one you are interested in purchasing), an estimate of the value of the property (this may even be the sales price), and the amount of the loan you are seeking – the lender is required to provide you with a Loan Estimate form within 3 business days. Even if you are not yet ready to move forward, the lender is required to provide you with this information.

    Q: What counts as a “business day”?
    A: There are two different definitions of what counts as a business day according to the CFPB – one for the Loan Estimate and a different one for the Closing Disclosure. For the Loan Estimate, a business day is a day on which the lender’s offices are open to the public for carrying out substantially all of its business functions. For the Loan Estimate, a business day will generally not include Saturday, Sunday, or any legal public holidays. For the Closing Disclosure, a business day is any calendar day except Sundays and legal public holidays (so it includes Saturdays).

    Q: Will I still receive a Good Faith Estimate?
    A: No, the new Loan Estimate form takes the place of the Good Faith Estimate.

    Q: If the lender sends me a Loan Estimate form do I have to do my loan with them?
    A: You have no obligation to a lender who provides you with a Loan Estimate, and the lender will not move forward until you provide an intent to proceed.

    Q: Will I only get one Loan Estimate from the lender?
    A: The lender will issue a revised Loan Estimate for changed circumstances that may occur after the Loan Estimate was provided. These changed circumstances are defined in the regulation, and include:

    • An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction
    • Information specific to the consumer or transaction that the creditor relied upon when providing the Loan Estimate and that was inaccurate or changed after the disclosures were provided
    • New information specific to the consumer or transaction that the creditor did not rely on when providing the Loan Estimate.

    Q: When will I receive my Closing Disclosure form?
    A: Once the loan has been processed and all underwriting conditions have been met, your lender will provide you with your Closing Disclosure. By federal regulation you are required to be given a 3 business day period to review the Closing Disclosure before you can consummate the transaction. If revised Closing Disclosures are required, they may trigger a new 3 business day review period if they affect the APR, there is a change in the loan product, or if there is the addition of a prepayment penalty to the loan.

    Q: Do I always have to wait 3 days after the Closing Disclosure is issued to go to closing/signing?
    A: Yes, 3 business days is the minimum required time for review according to the CFPB. While there is an exception for “a bona fide personal financial emergency”, the example given for such an emergency (an imminent sale of their home at a foreclosure) is so extreme that lenders will likely not be able to use this exception. It is also important to realize that if the Closing Disclosure is not delivered in person that 3 additional business days are also required for the disclosure to be considered received unless the lender can evidence receipt before then. The federal regulations require that you have 3 business days to review the Closing Disclosure before consummation can occur. This is beyond your lender’s control.

    Q: Do we always have to wait 3 business days after issuing a revised Closing Disclosure before consummation?
    A: There are only 3 situations that require a new waiting period when a revised/updated Closing Disclosure is issued before consummation:

    • The disclosed APR becomes inaccurate.
    • The loan product changes.
    • A prepayment penalty is added.

    Any other situations that may require a revised Closing Disclosure (even post-consummation events) do not require the 3 business day waiting period. (For example, if damage discovered during a walk through requires a seller credit, it would not require a new waiting period – UNLESS IT AFFECTED THE TERMS OF THE LOAN AND THE APR CHANGED.)

    Q: Who will be completing the Closing Disclosure that is now taking the place of the HUD-1?
    A: Lenders will now be responsible for preparing the Closing Disclosure. Previously HUD-1 settlement statements were prepared by the closing agent, title company, or attorney closing the transaction. Now it is the lender’s responsibility to prepare the Closing Disclosure and ensure delivery to the consumer.

    Q: Is consummation the same as closing or settlement?
    A: No, consummation may commonly occur at the same time as closing or settlement, but it is a legally distinct event. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.

    Q: Will issues at walk-through delay my closing?
    A: If an issue is found during a walk-through, a seller may issue credits to the buyer. Although a new Closing Disclosure would be required, it would not require a 3 day review period.

    SUMMARY

    Will these new changes delay my closing?

    While the TILA-RESPA Integrated Disclosure rule (TRID) was enacted to protect consumers, due to the complexity of a real estate transaction and the complexity of the regulations for mortgage loans, there is a possibility that something may happen where your lender will be forced (by regulation) to postpone a signing/closing due to no fault of yours or your lenders. Your real estate agent will work with you and your lender to try and ensure a smooth process and to close on time. You can help by working closely with both your agent and your lender to provide all needed documentation and other requested items. You can also help ensure a smooth process by not making changes late in a transaction, and by choosing a lender to work with early in the process.

    It is important to remember that there is more to a mortgage loan than the rate and some fees. Choosing a low cost mortgage lender could indeed cause you more problems now than ever before by delaying your closing. It is important to work with a reputable and professional lender who has properly prepared for the new TRID regulations. Feel free to ask your real estate agent for the name of such a lender.

    We hope you found the provided information helpful. Remember, contact us if you have any questions that weren’t answered here, or if you would like to know more about the preparations we’ve made to ensure you continue to get great service and to try and avoid any TRID related problems.

    This TRID resource guide was brought to you by: Zebaida Group

    If you have additional questions, please contact us at 973.251.0182.

    Please visit our Zebaida Group Real Estate Dictionary to learn about some of the terms associated with other aspects of a real estate transaction.

    The information in this guide is not an advertisement for the extension of credit to consumers. This guide does not represent a legal interpretation, guidance, or advice of the TILA-RESPA Integrated Disclosure rule. While efforts have been made to ensure accuracy, this presentation is not a substitute for the real rule.