There are changes taking place within the financing industry which are designed to increase clarity to consumers but may also create additional steps in the loan process. By October 2015 the Consumer Financial Protection Bureau, which is a Federal Agency put together in 2010 in response to the risks incurred by the financial crisis of 2007-08, has put together TILA RESPA Integrated Disclosure reporting requirements. TILA stands for Truth In Lending Act and RESPA stands for Real Estate Settlement Procedures Act. These new procedures are meant to merge some of the financial disclosures and closing documents which we see in a real estate transaction.
Currently, consumers are used to seeing a GFE (Good Faith Estimate) and a TIL (Truth In Lending) disclosure by the lender. These documents are meant to disclose the fees and interest rate being provided to the consumer for their home loan. Another document which a consumer reviews prior to closing is the HUD-1 Settlement Statement, which is a standard form providing details on all the fees associated with the purchase whether you are a buyer or seller. The TILA RESPA Integrated Disclosure (TRID) will be a combination of these things. The merger of these documents will result in the following:
GFE + TIL = Loan Estimate. The Loan Estimate is a form which will be provided to the consumer no later than three days after the application for the loan is taken. It will provide an explanation on the rate, fees and other features that are important for a borrower to know.
HUD-1 + FINAL TIL = Closing Disclosure. The Closing Disclosure is a form which will combine the information found in the HUD-1 and the Final TIL and which will contain a summary of all the associated fees and shall be provided no later than three days prior to signing of the promissory note.
These changes affect lenders more than they do consumers, but are things that consumers should be aware of when they are obtaining financing. It is part of the awareness that you should have when purchasing or selling a home. For more information on how these changes affect you please contact us.