The new TILA-RESPA Integrated Disclosures (TRID) will take effect on October 3, 2015. As this date approaches, you may have heard a few terms and phrases you haven’t heard before. Whether you’ve been through the home purchase process many times before, or you’re preparing to buy your first home, it’s important to familiarize yourself with these terms and to understand what they mean for you, the consumer.
TILA refers to the Truth in Lending Act. This law requires mortgage companies and other lending institutions to disclose all costs and fees associated with a borrower’s transaction. RESPA stands for Real Estate Settlement Procedures Act. This law requires lenders, loan servicers, and brokers to provide borrowers with disclosures regarding the costs associated with real estate settlements. RESPA also prohibits anti-competitive practices that can inflate the costs of real estate transactions, such as kickbacks.
TRID stands for TILA-RESPA Integrated Closing Disclosures. TRID is a new Rule which applies to most residential mortgage transactions, that combines the Good Faith Estimate, the Truth-in-Lending statement, and the HUD-1 into two new forms: the Loan Estimate and the Closing Disclosure. Therefore, TRID is the integration of the TILA and RESPA disclosures.
A Loan Estimate (LE) is a form that the consumer receives within three days of applying for a mortgage. It details everything you need to know about the loan you have applied for, including the estimated interest rate, monthly payment, closing costs, and any other fees. It will also inform you of any special features in the loan, such as a prepayment penalty.
A Closing Disclosure (CD) is a form the consumer receives at least three days before closing on a residential mortgage. This form includes loan terms, projected monthly payments, and what closing costs will be involved. The three-day window allows you to compare these terms and costs to the ones estimated in your LE, and to ask your lender any questions you may have about your loan before closing.
The Creditor in a mortgage transaction is your mortgage lender. This is the financial institution supplying the funds for the loan, and instituting the terms and conditions of the loan.
The Consumer in a mortgage transaction is the borrower, or the person(s) taking out the loan.
Consummation is the date on which the consumer becomes contractually obligated to the creditor on the loan.
Knowing the terminology involved in loan transactions that start after the TRID deadline will help you be better prepared and avoid delays in your loan closing. For more information about TRID, and about what NFM Lending is doing to prepare for TRID, click here. If you are ready to purchase a home, click here to contact one of our licensed mortgage Loan Originators today to get started!