New Real Estate Disclosure Lending Laws
TILA RESPA Integrated Disclosure “TRID”
The new disclosures act in mortgage lending that was due to commence in August has been pushed back for two months to October 3, 2015. The truth in lending act (TILA) and the real estate settlement and procedures act (RESPA) combined, otherwise known as “TRID”, will roll out in the fall of this year and it will impact all businesses and professionals that touch a residential mortgage, as well as homebuyers. Expect to see new forms and delays in closing escrow.
Basically industry insiders claim that with the TRID act the days of getting a mortgage loan cleared on any fast track are now over. The new rules mandate that for every loan application, the mortgage lender must provide a multi-tiered loan disclosure form which the homebuyer has 3 days to concede or pass. The HUD-1, Good Faith Estimate (GFE) and the TILA disclosures are going to be replaced by two new forms. These new forms will be the Loan Estimate form and the Closing Disclosure form. Borrowers will have 3 days after receipt of the Closing Disclosure to review the form and its contents.
New disclosure regulations “Know before you owe”
What does the TRID act mean to the industry in changing house prices by way of the extra closing costs? “Know before you owe” is the term used for the law proposed by the Federal Financial Protection Bureau to further prevent the glaring mishaps in the subprime stated income loan era. Many of the predatory lending practices of the time are now being tightly railed in with every new mortgage lending and disclosure law. The idea is to protect the homebuyer from any “bait and switch” programs like “100% financing no money down” schemes used in the past. However, the new and first time homebuyers will likely be paying for the added disclosures and due diligence.
How will TRID affect costs associated with buying a house?
In essence, every time a new homebuyer goes through the TRID disclosure process and they decide not to buy, all that documentation is wasted work. This can easily happen if buyers choose another property which starts the lending disclosure process all over. Real estate industry insiders claim the TRID act will almost certainly raise fees for the extra documentation and mortgage loan research. The banks may raise their closing fees to cover the cost of both the mandated software upgrades and any new employees needed to take on the extra workload.
As the TRID law is a Federal act, expect it to be coming to your state. The new two month extension before the law comes into play will allow mortgage brokers and lenders to “get up to speed” before it is enacted.