DC TRID

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TRID and Your DC Real Estate Transaction

What is TRID?

On October. 1, 2015. TRID (TILA-RESPA Integrated Disclosure) replaced the HUD-1 Settlement and Good Faith Estimate. The change was a result of the Consumer Financial Protection Bureau’s aim to ensure the mortgage industry will not repeat behaviors that led to the Great Recession in the early 2000’s. CFPB is the new oversight agency for the industry, replacing the Department of Housing and Urban Development. The CFPB (Consumer Financial Protection Bureau) created a new real estate mortgage closing disclosure form that combines TILA and RESPA disclosures for borrowers. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act prompted a single, unified form for loan applicants; a Loan Estimate and a single form for buyers settlement document called the Closing Disclosure that satisfy TILA and RESPA requirements. CFPB changes to RESPA and the Truth in Lending Act (TILA) under the Dodd-Frank Wall Street Reform and Consumer Protection Act combines the GFE with the TIIA disclosure now called the Loan Estimate (LE) and the HUD-1 settlement statement with the final TIL, now called the Closing Disclosure (CD).

Seven facts to know about the DC TRID mortgage process

  • Pre-Approvals are unchanged by TRID. The Know Before You Owe rule does not make changes to pre-approvals. The more time and effort you invest in learning about home loans and defining what they want and what they’re capable of financing before they select a home, the smoother the path from contract to closing will be. Ideally, before you select a home, buyers will have communicated with one or more lenders or homeownership counselors and will: Have decided upon the specific type of loan that will best meet your needs (for example, Conventional vs. FHA), and Feel confident you will be able to obtain financing. This enhances your ability to request and receive meaningful Loan Estimates for comparison;
  • The application process begins with a Loan Estimate. The application process typically begins after you have identified a property. Lenders must provide Loan Estimates within three business days after you have provided that lender with: Name Income Social Security number (so the lender can check credit) Address of the home they hope to purchase Estimate of the home’s value (typically the sale price) Amount to borrow NOTE: The lender must provide the Loan Estimate within three business days, but there is no set time frame for you to receive it. If the lender mails the Loan Estimate, you may receive the Loan Estimate more than three days after their application. NOTE: Previously, comparing multiple loans could be difficult because each lender might have different requirements for an estimate, including extensive written documentation. Now, though lenders may accept and consider income verification documents and other information voluntarily provided, they can’t require this documentation as a condition of providing a Loan Estimate. As a result, you should have a much easier time getting and comparing Loan Estimates from different lenders. You can also explore other topics with competing lenders, including the lender’s interest rate lock policies, the lender’s ability to close within the desired timeframe, whether electronic delivery of documents is anticipated, and how you should expect to interact with the lender during the loan process. Issuing a Loan Estimate does not mean that the lender has approved or denied your loan. By issuing the Loan Estimate, the lender has committed to honoring the fees described in the Loan Estimate as long as the loan is later approved without any changes in circumstance affecting the loan application;
  • You must indicate your intent to proceed. Once you have compared Loan Estimates and determined which loan best meets your needs, let the lender know. If you’re silent, the lender cannot assume an intent to proceed. Lenders likely have different requirements for what you need to do to indicate intent to proceed. NOTE: Lenders won’t move forward with an application without a clear indication from you that you intend to proceed. And after 10 business days without that indication, the lender is no longer required to honor the terms initially offered in the Loan Estimate. If the lender closes an application because the application remained incomplete, you will most likely need to start over from the beginning;
  • Once you indicate intent, lenders can charge fees. Until you indicate intent to proceed, lenders can’t charge any fees in connection with a mortgage application, including an application or appraisal fee. The only exception is a reasonable fee for the credit report. Previously, lenders may have requested credit card information or a post-dated check to be charged or cashed later, after a required estimate was sent. Under the new rule, this is not permissible. Payment information can be obtained only after the lender provides the Loan Estimate and you have expressed intent to proceed. Because lenders cannot collect payment information in advance, lenders may require you to provide payment for an appraisal, application, or other loan processing fee immediately after or as a part of confirming the intent to proceed with the application. Lenders may require payment before beginning the appraisal, processing, verification or underwriting processes;
  • DC TRID and Changed Circumstances: A changed circumstance may mean a revised Loan Estimate or a revised Closing Disclosure. A lender is responsible for providing accurate pricing information for the loan requested, based on the best information reasonably available to the lender at the time the disclosure is provided. However, if the information about you, the proposed loan, or the property was incorrect or changes, a revised Loan Estimate may be issued. This can be referred to as a “changed circumstance.” A new Loan Estimate can reflect changed rates and terms caused by the new information. Not all changes require the lender to issue a revised Loan Estimate. Minor changes, for example when the seller agrees to pay for a specific cost not included in the original agreement, do not require the lender to issue a revised Loan Estimate. Significant changes most likely do. Common reasons why a Loan Estimate may be revised include: You decided to change loan programs or the amount of the down payment The appraisal on the home came in higher or lower than expected Your credit status changed, perhaps owing to a new loan or a missed payment The lender could not document overtime, bonus, or other income provided on your application. If changes occur later in the mortgage process, lenders may need time to respond. For example, if you request a different loan program late in the process, an appraisal or underwriting step may need to be repeated.
  • Closing Disclosure at least 3 business days prior to settlement. Lenders need to make sure that you receive the Closing Disclosure at least three business days before closing. This gives you time to review a summary of the final loan terms. Buyers should no longer be faced with significant changes from the lender and be pressured to sign on the same day. The Closing Disclosure can be compared with the information contained in the initial or a revised Loan Estimate (or, in the case of a revised Closing Disclosure, the initial Closing Disclosure). Flexibility has been built into the rule to accommodate small, last-minute changes typical of purchase transactions. However, when changes to the transaction are significant, a new three-business-day review period is required. Since large, last-minute changes should be rare, an additional review period should also be rare. Learn why an extra three-day review is unlikely. To provide a Closing Disclosure three business days before the closing that reflects all of the terms of the transaction, settlement agents and creditors need as much information from the buyer, the seller and the agents about the transaction as far in advance of closing as possible. At the same time, most settlement issues, such as adjustments to seller credits to account for repairs, that are currently addressed as late as the day of closing can continue to be handled at closing without requiring a new three-business-day review period. TIP: The Closing Disclosure must contain the buyer’s and the seller’s real estate brokerages’ and agents’ names, addresses, state license ID numbers, email addresses, and phone numbers. If this information is unknown, the form can’t be completed. You need to communicate this information to the lender to prevent delay.
  • Extra 3 day reviews are likely. You should never be faced with major changes to their loan terms on the day of closing and be forced to make such an important decision under pressure. While most changes that come up in the last few days before settlement will not delay a closing, there are three major changes to loan terms that will require the lender to issue a revised Closing Disclosure and will trigger a new three-business-day review period. You generally may not waive your right to this review period. The changes that trigger a new three-business-day review period are: The APR (annual percentage rate) increases by more than 1/8 of a percent for regular loans (most fixed-rate loans) or 1/4 of a percent for irregular loans (most adjustable loans). A decrease in APR will not require a new three-day review if it is based on changes to the interest rate or other fees. Lenders have been required to provide a three-day review for these changes in APR since 2009; A prepayment penalty is added, making it expensive to refinance or sell; The basic loan product changes, such as a switch from fixed rate to adjustable interest rate or to a loan with interest-only payments.

How doesTRID Affect Your Purchase Process?

Timelines for purchases with loans are extended. No longer will 15 day to 30 day purchases be the norm. Instead, lenders are advising 40-45 day minimum escrow periods. No last-minute changes to your loan are possible. Walkthroughs will no longer be performed the day of settlement. It’s advised that buyers should perform their final walkthroughs 3-5 days prior to settlement. There are many more ways in which TRID has changed the DC real estate purchase process for borrowers. Here’s a worksheet to help: Wordsheet

Will TRID Affect Your Closing Date?

CPFB says no, but in our experience, yes–it may. Be available for inspections and other contingency-related appointments immediately following contract. Get your lender everything needed as early in the lending process as possible. Previously, lenders were pressured to meet shorter escrow terms. Now, the lending process drives the transaction and TRID drives the lending process. Closing factsheet

Explore DC TRID Forms

CPFB’s interactive sample forms may help you learn what to look out for and what details to double check. They also include definitions for unfamiliar terms. Explore the guide to the Loan Estimate Explore the guide to the Closing Disclosure
The CFPB’s Owning a Home website provides a full suite of online tools and resources for prospective homebuyers. The site empowers homebuyers with an interactive guide to the process of buying a home and finding a mortgage. Supportive tools and resources help people set expectations and think through key decisions such as how much they can afford to spend, which loan option is right for them, what range of interest rates they can expect, and how to ensure a smooth closing.  consumerfinance.gov/owning-a-home

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Information is believed to be accurate, but not guaranteed. Subject to change without notice. Realtors are not CPAs or attorneys and are not permitted to give tax or legal advice or interpretations. Refer to a tax or legal professional for all related matters. Any information provided on this site pertaining to such issues is not intended as tax or legal advice and is provided solely for the purpose of illustration. Resources cited are believed to be accurate but are not guaranteed.
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