Date: May 2, 2023
If you’re a compliance professional in the mortgage lending industry, you are no doubt familiar with the TILA-RESPA Integrated Disclosure (TRID) rule. TRID is a critical component of mortgage lending that requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a loan application, and a Closing Disclosure at least three business days before the loan closing. In this post, we will provide you with the ultimate guide to understanding TRID, including Loan Estimates and Closing Disclosures.
What is TRID?
TRID is a regulation implemented by the Consumer Financial Protection Bureau (CFPB) in October 2015. It was designed to provide borrowers with greater transparency and more accurate information about their loans. TRID replaces two separate forms with one unified disclosure form, making it easier for borrowers to understand the terms of their loans and make informed decisions about whether to proceed with the loan.
Loan Estimates: Key Components
The Loan Estimate is a three-page document that provides borrowers with an estimate of the costs associated with their loan. It includes important information about the loan, such as the loan amount, interest rate, estimated monthly payments, and closing costs. The Loan Estimate also includes a breakdown of the loan's terms, such as whether the interest rate is fixed or adjustable and whether there is a prepayment penalty.
Closing Disclosures: Key Components
The Closing Disclosure is a five-page document that provides borrowers with a detailed breakdown of the final loan terms and closing costs. It shows the amount of cash needed to close, the loan terms, and the total amount of payments you'll make over the life of the loan. It also includes an itemized list of closing costs, such as fees for appraisals, credit reports, and title searches.
TRID Compliance Challenges
TRID presents some challenges for lenders in terms of compliance. Compliance with the regulation requires extensive coordination and communication between the lender, title company, and other parties involved in the closing process. Additionally, the timeframes mandated by TRID can be difficult to meet, particularly in complex transactions. Compliance professionals must ensure that their systems and processes are designed to comply with TRID requirements and that they have adequate resources to manage compliance.
Tips for Navigating TRID
To navigate TRID effectively, compliance professionals must have a thorough understanding of the regulation and its requirements. They should work closely with their lending team to ensure that their processes and systems are designed to comply with TRID requirements. Additionally, they should communicate clearly and regularly with borrowers and other parties involved in the closing process to ensure that everyone is on the same page.
TRID is a critical component of mortgage lending that provides borrowers with greater transparency and more accurate information about their loans. Compliance professionals must have a thorough understanding of the regulation and its requirements to ensure that their systems and processes are designed to comply with TRID requirements. By understanding the key components of Loan Estimates and Closing Disclosures, and staying up-to-date with TRID updates and changes, compliance professionals can effectively navigate TRID and ensure that their organizations remain in compliance. However, if you run into a complex problem, it’s always recommended that you consult your compliance subject matter expert at your institution or your legal team for assistance.
Source: Alison Stokes, CRCM
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