On October 10, 2017, amended rules were published in the Federal Register that will provide greater clarity and certainty to the Know Before You Owe, or TILA-RESPA Integrated Disclosure Rules (TRID). Receiving a mortgage, especially if it is your first, is likely to be the biggest financial decision you will ever make. You want to know and understand the consequences of what you are doing before committing. TRID was intended to smooth the process for lenders and ensure that consumers have information readily available before they bind themselves to such an important final decision.
TRID was originally enacted in October of 2015. It requires lenders to provide consumers with specific disclosures, mainly the Loan Estimate and Closing Disclosure. These documents replaced the Good Faith Estimate and HUD-1 Settlement Statement. The amendments sought to bring greater clarity to TRID and to better enable borrowers and lenders to understand the requirements.
Highlights of Some of the Amendments
Tolerance for Total Payments
The amendments set forth tolerances that apply to the “Total of Payments” disclosure. The total number of payments is equal to the total amount the consumer will have paid after they make all payments of principal, interest, mortgage insurance, and all loan costs. The new rule states that the disclosure will be accurate if it is:
- Understated by no more than ½ of 1 percent (or 1 percent for the refinance with a new creditor), or
- Greater than the amount required to be disclosed.
Housing Assistance Loans
The amendments revise two of the six criteria for the exemption from TRID requirements for certain low-cost, non-interest bearing, subordinate lien, housing assistance loans. Transfer taxes, as a well as recording, application and counseling fees may be paid without the lender losing the exemption and recording fees and transfer taxes are now excluded from the 1% limit of borrower’s fees. It is hoped that this amendment will permit more housing assistance loans to qualify for a exemption, which will encourage more lending.
Privacy and Sharing of Information
TRID requires that a Closing Disclosure be presented to the borrower before consummation of a transaction. There have been many concerns about sharing this Closing Disclosure with third parties, such as the seller and real estate brokers. Previously, it was a common practice for creditors and settlement agents, to deliver the HUD-1 Settlement Statement to consumers, sellers, and real estate brokers. While not expressly permitting the Closing Disclosure to be shared with realtors etc., the amendments stated that such sharing would likely fall under exceptions to the Gramm-Leach Bliley Act.
The existing rule had stated that coverage for cooperative units was dependent on whether cooperatives were classified as real property according to applicable State law. State law sometimes has inconsistencies in the way it treats different cooperatives. Some cooperatives are defined as personal property, while others are real property. The new rule provides that, whether State Law recognizes cooperative units as real property or not, TRID applies to cooperative units.
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