A Guide To TILA-RESPA Integrated Disclosures (TRID)

While searching for a mortgage, you might come across the term “TRID” or the phrase “Know Before You Owe.”

TRID is an acronym that stands for TILA-RESPA Integrated Disclosures. It combines two federal laws, the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). Both protect borrowers by requiring lenders to disclose key information about mortgage loans within mandatory timelines.

Let’s explore how TRID delivers more clarity to home buyers and protects them during the home buying process.

TRID is a series of guidelines enforced by the Consumer Financial Protection Bureau (CFPB) to create a more consumer-friendly mortgage process. These rules specify what information mortgage lenders must provide to borrowers and when. TRID also regulates lenders’ fees and what is allowed as a mortgage matures.

These guidelines standardize mortgage disclosures, helping borrowers better understand their loan options and choose a mortgage lender with their best interests in mind. As of 2015, all mortgage lenders must follow TRID rules when they issue a mortgage or offer an estimate.

TRID rules are sometimes called the “Know Before You Owe” rules because they break down the estimated terms of mortgages, including the costs and fees consumers should know, read and understand before making an offer on a house and agreeing to monthly loan payments.

Before you decide on a mortgage, TRID guidelines ensure you receive two key disclosure documents from a mortgage lender: a Loan Estimate and a Closing Disclosure.

The Loan Estimate

During the mortgage process, a lender must provide a Loan Estimate, also known as a good faith estimate. The estimate details the loan amount, estimated interest rate, closing costs and other costs and terms connected to the loan. While the Loan Estimate may change slightly from the start of the mortgage process to the end, a lender can’t significantly modify the agreement terms. Borrowers should receive an estimate during the loan application or preapproval process.

Compare Loan Estimates from multiple mortgage lenders to better estimate how much house you can afford and identify which lender offers the lowest rates and fees. You don’t have to work with a particular lender because they sent you a Loan Estimate, especially if a trusted competitor makes a better offer.

The Closing Disclosure

As the name suggests, you receive the Closing Disclosure when it’s time to sign and finalize your mortgage. The Closing Disclosure outlines the same information as the Loan Estimate, including the loan amount, interest rate, APR, closing costs and other terms.

You should compare your Loan Estimate to your Closing Disclosure to ensure the information matches. If your rates, fees or purchase price differ significantly from the Loan Estimate, ask the lender to explain the discrepancy. For example, the taxes and insurance estimates may have changed.

Mortgage lenders must follow TRID guidelines when offering borrowers a loan, including:

• No application fee: Under TRID rules, a mortgage lender can’t charge any fee before they provide a Loan Estimate. The only fee a lender can charge before providing a Loan Estimate is the fee to run your credit report.
• Quick Loan Estimate delivery: A lender must issue a Loan Estimate within 3 days of receiving your mortgage application. Borrowers use the Loan Estimate to review a loan’s terms and costs and ask the loan originator any additional questions.
• Maintenance of estimates and disclosures: Your lender must keep a copy of your Loan Estimate at least 3 years after you sign your mortgage and a copy of your Closing Disclosure for at least 5 years.
• Closing Disclosure 3-day waiting period: Your mortgage lender must provide your Closing Disclosure at least 3 business days before you sign and finalize a mortgage. If you request changes to your Closing Disclosure, your mortgage lender must provide a revised Closing Disclosure. And you’ll have to wait an additional 3 business days to finalize the loan.
• Furnish contact information: Your lender must provide their contact information and a way to contact the loan officer indicated in your Loan Estimate.

TRID regulations can help shield home buyers from high-pressure or unfair sales tactics and help ensure they know what they’re signing on for when they agree to a loan.

TRID also introduces a new layer of responsibilities when buying a house. Once you decide on a lender, you must notify them and sign an “intent to proceed” document. If you don’t sign this document, a lender legally can’t move forward with the mortgage process.

You also need to notify your lender when you receive your Closing Disclosure so they can start the 3-day countdown before you can close on your loan.

If you wait to tell your lender you received the Closing Disclosure, you may prolong finalizing the sale.

As a seller, you’re not responsible for the actions of your buyer’s mortgage lender. However, you may experience closing delays or last-minute cancellations if the buyer’s lender attempts to finalize a loan that broke TRID regulations.

Many lenders estimate it takes 45 – 60 days to close on a home loan, given mandatory waiting periods and disclosure timelines. Consider how the closing timeline may impact your move-out date when selling your home, especially if there are delays.

Though TRID guidelines are relatively new, a few basic legal requirements have governed lenders for over 4 decades. TRID is a condensed version of two regulations, the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).

Let’s take a look at how these two federal regulations work.

The Truth In Lending Act (TILA)

In 1968, the federal government introduced TILA regulations to discourage dishonest credit lending practices. TILA and its associated regulations, known as Truth in Lending disclosures, protect consumers from unfair credit and credit card billing practices.

TILA requires lenders to provide written information about interest rates and loan payments upfront before you sign a loan agreement. The act also offers borrowers the right to rescind or back out of certain mortgages within 3 days of receiving their Closing Disclosure without losing money. TILA doesn’t guide lenders on how much they can charge in interest, but it ensures borrowers know where to find the interest rate a lender offers to easily compare mortgage loan offers.

The Real Estate Settlement Procedures Act (RESPA)

RESPA regulates settlement costs (also known as closing costs) and protects home buyers from unfair real estate practices. Before you borrow money, mortgage lenders must provide information on settlement services, consumer protection laws and real estate transactions. This way, you can more accurately estimate your fees and expenses.

RESPA also eliminates the practice of “kickbacks,” or referral commissions, that can inflate the cost of a loan at the last minute. RESPA also regulates the use of escrow accounts, where money is held by a neutral third party and released once specific conditions are met. RESPA prohibits lenders from demanding large amounts from escrow before a loan is approved.

TRID is a series of rules that dictate what information mortgage lenders must provide borrowers and when they must provide it. TRID rules also regulate what fees lenders can charge and how these fees can change as a mortgage matures.

With the transparency provided by TRID, you can secure several Loan Estimates from multiple lenders and confidently compare different offers to get the best home loan option for you.

If you’re ready to purchase a home, start the mortgage process today.