Proposed Changes To TRID Aim To Make Implementation Simpler
When the TILA-RESPA Integrated Disclosure Rule (TRID, a.k.a. the Know Before You Owe mortgage rule), went into effect in October of 2015, its intent was to create an environment of informed consumers and to prevent buyers from biting off more than they could chew in the real estate market. The Consumer Financial Protection Bureau (CFPB) has monitored TRID implementation and effectiveness since that time, and has now proposed a set of updates aimed at making it clearer how the mortgage industry should act in order to comply.
The TRID rule requires that lenders provide applicants a Loan Estimate form within three days of the application date, and limits the fee changes that can be made to the original loan estimate. Zero tolerance fees are those, which the lender has direct control over, so the assumption is that they can give a precise number for those fees.
The second and generally largest category of fees includes fees for required services that are paid to an entity other than the lender, like recording fees, or fees to be paid to a service provider recommended the consumer by the lender. Under TRID, the sum of all of the charges in this category cannot exceed 10%.
A third category of fees, called No Tolerance or Unlimited Tolerance, includes fees that the lender has no control over, like requires services performed by a provider not included on the lender’s list of service providers. These are generally charges that arise from choices the consumer makes, and the lender is not held accountable for the accuracy of the estimates they provide at the Loan Estimate stage.
Prior to TRID, lenders were required to include finance charges in the disclosure of the total of payments. Under TRID’s current specifications, finance charges are not included in the calculation of total of payments.
TRID also included a privacy provision that prevented lenders from releasing the required forms directly to the seller and directly involved third parties like real estate brokers or attorneys. This can hamper communications among the involved party and slow closing.
In the case of cooperatives, buyers become stakeholders in a corporation that owns the entire property, and the buyer gets exclusive right to one of the units within the property. This means that in some circumstances, a co-op is considered real property and in other cases, it’s considered personal property; TRID only covers transactions secured by real property.
Proposed TRID Changes
- Total Of Payments – The proposed changes to TRID would include tolerance provisions for finance charges, to be included in the total of payments disclosure. This would parallel the pre-TRID requirements for total payments disclosures, with regard to finance charges.
- Privacy And Information Sharing – In their proposal, the CFPB stated that they understand that “it is usual, accepted, and appropriate for creditors and settlement agents to provide a closing disclosure to consumers, sellers, and their real estate brokers or other agents. Although the CFPB is seeking additional commentary as to how, precisely, to implement a change on this point, they propose to provide some means for lenders to provide sellers, brokers, and other agents with separate disclosure forms.
- Housing Assistance Lending – This proposal is not a change, so much as a clarification that recording fees and transfer taxes may, in fact, be charged in transactions involving housing assistance, without the transactions becoming ineligible for the partial exemption for disclosure requirements. This proposed change is intended to simply matter so that more lenders will partner with housing finance agencies in the future.
- Co-Operatives – The last proposed change to TRID would define all co-operatives as real property; so all sales of co-op properties would be covered under TRID.
Keep Up To Date In Maintaining TRID Compliance
Staying on top of the latest changes and re-setting your workflow to maintain compliance with ever-changing regulations can be a time-eating task. Easy Soft’s suite of real estate closing solutions offers the convenience of forms automation and the assurance that every transaction you process is fully compliant at all times. Our software products are meticulously designed and continually updated to provide you painless compliance and a smoother workflow from start to finish.