What is TRID?

TRID, or TILA-RESPA Integrated Disclosure, also known as the “Know Before You Owe” rule will change how mortgages are done through altering the loan forms and practices. Originally slated to go into effect August 1, the Consumer Financial Protection Bureau (CFPB) has pushed the date to October 1 due to an administrative error.

This deferred start follows news from earlier this month that the CFPB would allow for a grace period before enforcing adherence to the changes. Although the grace period is currently open-ended, many people expect it will run through the end of 2015.

What Changes Under TRID?

Home buyers can expect to be using two new forms under TRID — the Loan Estimate and the Closing Disclosure. These two new loan forms are easier to understand than their predecessors and consolidate the previous forms. The forms are also designed to work together, something that wasn’t happening with the earlier forms.

The new forms clearly detail the loan amount, its terms, whether the amount can increase after closing for each section, and the feature of the loan, such as whether there is an early payment penalty or not.

The forms are designed to provide the buyer with more time to review the costs associated with the mortgage. The Loan Estimate document is due to the buyer three days after applying for the loan, while the Closing Disclosure must be presented three days before closing.

What Makes the New Disclosures Better Than the Old?

In addition to being easier to understand and having more time to review them, the Consumer Financial Protection Bureau tested the new forms in a quantitative validation study. Participants provided more correct information (using a sample mortgage) with the new forms than they did under the old. More correct information means less errors, and less need for re-issuing the forms.

Less mistakes is good news because under the new changes, corrections or additions to forms must be sent back to the buyer for another review and sign-off. This could delay the closing process if it is not effectively managed. However, it does ensure that the buyer is receiving an adequate chance to review all paperwork involved with the purchase. That’s why TRID has become commonly known as the “Know Before You Owe” rule.

The additions of these deadlines, along with the sign-offs required for alterations to the documents, have meant big changes for those involved in preparing mortgage documentation. Industry experts are not clear how disruptive this change will be as everyone does their best to work towards a smooth transition with as little effect on the market as possible.

If you want to feel confident about the closing process select a title company that keeps the customer in mind. At Bay National Title we’ve been preparing for TRID since late 2013 and the Dodd-Frank Act required the Consumer Financial Protection Bureau to integrate the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) disclosures and regulations. Contact us today for peace of mind at your closing.