What is TRID? - Definition, Purpose & Rules

Instructor: Janice Chretien
The Consumer Finance Protection Bureau implemented TRID to inform and protect consumers when applying for real estate mortgages. This lesson will define TRID, provide a brief history, detail the information provided to consumers, and conclude with the basic compliance regulations.

Home Buying Information

Jill has been shopping for her dream home for a few months, and today, she found it. It has a modern kitchen, a walk-in closet, and a fenced yard. Jill is finally going to get the puppy she has been wanting. Her agent explained that Jill needed to provide her mortgage broker with the information required under TRID rules:

  1. Name
  2. Income
  3. Social security number
  4. Address of the property she is purchasing
  5. Estimated value of the property
  6. Mortgage loan amount wanted

''TRID? What is TRID?'' Jill asked her real estate agent.

TRID: Purpose and History

TRID, or TILA-RESPA Information Disclosure, informs consumers applying for a mortgage and defines compliance rules for lenders. It is a consolidation of TILA (Truth in Lending) and RESPA (Real Estate Settlement Procedures Act) disclosures. That definition left Jill with more questions than answers. As they drove back to the real estate office to write up Jill's offer, her agent continued to explain.

In 2007, the U.S. national economy began to experience a financial crisis caused by poor mortgage practices and predatory lending. Homeowners were allowed to borrow more than they could repay, getting adjustable-rate mortgages that would eventually result in monthly payments they could not afford, and buyers were borrowing more than the home was worth, leaving many with negative equity.

The subprime mortgage crisis led to the financial disaster known as the Great Recession. As the economy began to recover, the Consumer Financial Protection Bureau (CFPB) went to work to develop regulations that would prevent the subprime mortgage crisis from ever happening again.

The CFPB launched the mortgage initiative, Know Before You Owe (KBYO), also known as TRID, in November 2013. Before TRID, borrowers were presented with the Truth in Lending Disclosure and Good Faith Estimate as required by TILA, and a Settlement Statement HUD-1 and Truth in Lending Disclosure Statement required by RESPA.

TRID simplifies the information by combining the four forms into two easy-to-understand documents: the Loan Estimate and the Closing Disclosure.

Loan Estimate

The Loan Estimate will inform the borrower of:

  • Interest rate
  • Monthly payment
  • Closing costs
  • Estimated taxes, homeowner's insurance, and assessments
  • Estimated mortgage insurance and how long it will be paid
  • If there is a penalty for paying the loan off early
  • If there will be an increase in the payment
  • If there is a large balance due at a future date (balloon payment)
  • If the loan is escrowed
  • Estimated cash needed at closing
  • Lender fees (origination charges, points, application feel, and underwriting fee)
  • Services you cannot shop for (pest inspection fee, survey fee, and title fees)*Taxes and government fees
  • Prepaids (insurance, interest, property taxes, mortgage insurance premium)
  • Initial escrow payment due at closing
  • Total interest percentage paid over the term of the loan
  • Total amount paid in 5 years and principal paid in 5 years
  • Information about late payments, refinancing, servicing of the loan, assumption, appraisal, and property insurance

Closing Disclosure

The Closing Disclosure has information from the Loan Estimate plus:

  • Fees for services provided for information about the property
  • Homeowner's association fees
  • Real estate commission
  • Home warranty fee
  • Inspection fees
  • A breakdown of fees paid by seller and borrower
  • Partial payment information

Rules

In compliance with TRID, your mortgage broker must provide you with the Loan Estimate no later than three business days after you apply for your mortgage. The lender cannot charge you any fees until after you have received the Loan Estimate and you have communicated that you want to proceed with the loan.

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