An Introduction to the Truth in Lending Act / Real Estate Settlement Procedures Act

 

10/30/2015

New federal regulation that went into effect on October 3 has slowed the mortgage loan closing process. But the change, commonly known as the TRID rule, has added valuable new
protections for homebuyers, said Stephanie Glowinski-Moeller, a mortgage loan originator at North Shore Bank.

TRID – which stands for Truth in Lending Act / Real Estate Settlement Procedures Act Integrated Disclosure – requires new mortgage disclosure forms and changes the way real estate transactions are processed and closed.
 
In the past buyers often received a thick stack of paperwork to review and sign very shortly before, or even at, the closing. Confusing language and lack of time kept many from reading the documents, sometimes resulting in unpleasant surprises down the road. Following the collapse of the housing bubble and the foreclosure crisis, new disclosure forms were mandated to help ensure that buyers understood what they were getting into. But the paperwork remained cumbersome and confusing.
 
As of October 3, disclosure forms have been streamlined and combined into new “Loan Estimate” and “Closing Disclosure” forms. The Loan Estimate lays out the costs and any possible changes in the mortgage. The Closing Disclosure shows all costs related to the closing and the exact amount of
money the borrower will be required to bring to closing.
 
To make sure buyers have time to digest this information, lenders are now required to get the Loan Estimate to the buyer no later than three business days after the loan application is submitted. Buyers must have at least seven business days to review the paperwork between receiving the Loan Estimate and the closing. The buyer must receive the Closing Disclosure at least three days before the closing.

The new regulations, along with additional regulations placed on mortgage lenders last year, have stretched the closing process timeline from 30 to 45 days in many cases. The Mortgage Bankers Association says buyers can help speed the process by taking the following steps:
  • Be responsive to your lender. He or she will ask you for additional information and the process will go much smoother if you deliver the documentation completely and quickly.
  • Tell your lender to move forward as soon as you finish shopping and are comfortable with your choice of loan. (Buyers are allowed ten business days to decide on a loan but do not need to wait that long.)
  • Read the Loan Estimate and any revisions to the Loan Estimate carefully so any questions can be resolved early in the process.
  • Avoid last minute changes to the loan to avoid delay and prevent an additional waiting period of three business days. 
  • Work with your real estate agent and the seller’s agent to conduct home inspections, order reports, and clear any contingencies as early in the process as possible.
  • Schedule your final walk-through well before the Closing Disclosure is issued, if possible.
  • Tell your lender as soon as possible about any change to the transaction that you think might impact the loan or the closing.
“There are some added steps that we’re all having to adjust to,” said Glowinski-Moeller. “But it protects the consumer, so it’s a positive development.”

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