Written By: Joel Palmer, Op-Ed Writer
Compliance with the amended TILA-RESPA Integrated Disclosure (TRID) rule is now mandatory, as of October 1, 2018.
Also known as the “Know Before You Owe” rule, the regulation went into effect in August 2015.
The new rule was the result of the Dodd-Frank Act. Prior to the new rule, lenders provided two disclosure forms to borrowers created by two agencies under two statutes: the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA).
According to Consumer Financial Protection Bureau (CFPB), the information on these forms overlapped, and the language was inconsistent. Dodd-Frank directed CFPB to integrate the mortgage loan disclosures under TILA and RESPA.
The CFPB rule replaced forms with two new ones, the Loan Estimate and the Closing Disclosure. According to CFPB, the new forms are easier to understand and easier to use. The rule also requires borrowers receive three business days to review the Closing Disclosure and ask questions before closing.
There have been several amendments to the rule since it went into effect. A year ago, CFPB finalized amendments that provided clarifications and technical corrections including:
Tolerances for the total of payments. Prior to the amended rule, the total of payments disclosure was determined using the finance charge as part of the calculation. The rule changed the calculation so that it did not make specific use of the finance charge. The Bureau’s updates include tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge.
Housing assistance lending. The rule gave a partial exemption from disclosure requirements to certain housing assistance loans originated primarily by housing finance agencies. The Bureau’s update clarifies that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The update also excludes recording fees and transfer taxes from the exemption’s limits on costs.
Cooperatives. The Bureau extended the rule’s coverage to include all cooperative units.
Privacy and sharing of information. The disclosure rule requires creditors to provide certain mortgage disclosures to the consumer. The Bureau received questions about sharing the disclosures provided to consumers with third parties to the transaction, including the seller and real estate brokers. CFPB added commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.
In May of this year, CFPB issued a fix to what became known as a “black hole” related to the disclosure of mortgage fees. Specifically, it refers to situations when certain fees and costs have increased between the issuance of the Closing Disclosure and the actual closing date.
Under the TRID rule, a Loan Estimate is used to reset tolerances, but the final version of this document must be received by the borrower within four days of closing. In situations when lenders learned of fee increases within the four-day window, they were not able to use the Closing Disclosure to reset tolerances. This created the “black hole.” The May 2018 TRID Amendment removed the four-day timing requirement.
CFPB has a library of resources to help mortgage processors and underwriters comply with the Know Before You Owe mortgage disclosure rules.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.