It was designed to provide consumers with clear, understandable information about their loan, its terms, and its associated costs - specifically costs associated with closing a mortgage loan. In addition, it was designed to help make sure that all the costs reported by lenders to borrowers were accurate, so that borrowers could make an informed decision on their loan.
In 2015, the Consumer Financial Protection Bureau (CFPB) introduced the TILA-RESPA Integrated Disclosure (TRID) rule to streamline the process of providing mortgage disclosures to borrowers. The rule requires lenders to provide two integrated disclosures: the Loan Estimate and the Closing Disclosure. The Loan Estimate must be provided to the consumer no later than three business days after they submit a loan application. The Closing Disclosure must be provided to the consumer at least three business days before the loan closes. This establishes a timeline which provides ample time for borrowers to review the details of their loan and closing costs before signing and completing the transaction.
The Loan Estimate provides borrowers with information on the terms of their loan, estimated closing costs, and potential risks associated with the loan. This includes information on the type of loan, estimated interest rate, monthly payments, estimated closing costs, prepaid finance charges, escrow account deposit requirements, and more.
The Closing Disclosure, on the other hand, provides detailed information about the terms of the loan, closing costs, interest rate, and other related information. This includes the loan amount, date and amount of first payment, terms, fees, points, APR, taxes, insurance, and other applicable charges.
In addition, TRID requires lenders to follow specific procedures when providing these documents to consumers. This includes making sure that the documents are written in “plain language,” that they are accurate, and that they are delivered on time. These requirements help ensure that all parties involved in the loan transaction have all the necessary information needed to make an informed decision.
Overall, the TRID rule is an important step towards ensuring that consumers have the most up-to-date information about their loan before signing and completing the transaction. This helps provide borrowers with peace of mind by ensuring that the loan terms and closing costs associated with the loan are fully understood and accurately reported. By creating a timeline which allows for adequate review of loan disclosures, TRID helps protect consumers from any missteps or surprises that may occur during the process.
This article was contributed on Aug 04, 2023