“Know Before You Owe.”

Article by: Margaret “Mieke” Driscoll

Ready or not, TRID (Truth in Lending – Real Estate Settlement Procedures Act Integrated Disclosures) is fully integrated into all residential real estate transactions involving residential mortgages, effective for all transactions inked after October 3, 2015. TRID does not apply to commercial real estate loans or cash deals.

TRID are new regulations from the Federal Bureau of Financial Consumer Financial Protection that were born out of the Dodd-Frank Act in the wake of the Wall Street collapse in the late 2000s. They combine certain disclosures to the lender in the application process and closing process for consumer mortgage loans. One of the biggest changes is that they require banks to provide copies of the disclosure statements at least three days in advance of settlement, as opposed to receiving all of the information about their loan costs, rates and other terms at the settlement table. Formerly a good faith estimate was required in advance, but not the final actual numbers.

TRID is also sometimes being referred to as “Know Before You Owe.” The aim is to educate the buyer in a more straightforward way and well in advance of settlement and to present information in a way that is easier for the consumer to digest. It shows in advance the estimated closing costs with the actual closing costs as well as the total monthly payments (with escrow) and cash the buyer needs to close the transaction at least three days in advance. In theory, TRID helps the borrower more easily understand the process and more easily compare loan products (though, arguably three days before settlement does not really provide time for comparison shopping!).

TRID most affects those in the real estate and banking industries. For those folks, it is important to be familiar with and understand the process so that you can best serve your clients. The change feels major, but is one that will become the norm over time as those in the industry master the system. It also forces the bank and closing agent to have more communication well before settlement and avoid last minute rushes. To the average consumer, the change will not likely be noticed, except that the consumer may appreciate having the information at least three days before settlement.

– Published in the Winter 2016 edition of Report from Counsel