When you apply for a new mortgage loan or refinance an existing loan, the mortgage process and documentation can seem overwhelming. Therefore, to simplify the amount of disclosure documentation required, the Consumer Financial Protection Agency (CFPB) has combined multiple mortgage disclosure documents into just two forms – a Loan Estimate and a Closing Disclosure. Below is information about these mortgage disclosure documents and what do you need to know about them.

What is TRID?

In October 2015, the CFPA issued the TILA-RESPA Integrated Disclosure (TRID) rule. This rule came about when CFPA decided to combine several mortgage disclosure documents that were established by the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single rule. The purpose of the TRID rule is to provide borrowers with accurate and easy-to-understand information on mortgage loan options and closing cost estimates. This information enables borrowers to make more informed decisions on whether they can afford a home and mortgage, and which loan option is best for them. Also, these documents warn borrowers about potential prepayment penalties and other loan terms they may want to avoid.

Previously under TILA and RESPA, borrowers received four mortgage disclosure forms. Under the TRID rule, borrowers now receive two documents – a Loan Estimate and a Closing Disclosure.

What information is included in a Loan Estimate?

Issued by the lender, the 3-page Loan Estimate provides the borrower with information about the loan amount, loan term, interest rate and monthly payment. It also tells you if any of the terms can change and if a prepayment penalty or a balloon payment is related to the loan. Additionally, you’ll be told the total amount you must pay at closing.

What do I need to know about a Loan Estimate?

By law, you must receive the Loan Estimate within 3 business days of your loan application being received by lender OR it must be placed in the mail no later than the 7th business day before your closing date. Additionally, the lender can’t charge you any fees – other than a realistic credit report fee – until the Loan Estimate has been provided to you and you’ve been told that your application can move forward.

What information does the Closing Disclosure include?

Supplied by the lender or the lender’s settlement agent, the 5-page Closing Disclosure recaps the information on the Loan Estimate. It also tells you what the final closing costs will be compared to the estimated closing costs in the Loan Estimate. The Closing Disclosure enables you to review the fees, terms and any changes made, so you can talk to your lender about them if you have questions.

What do I need to know about the Closing Disclosure?

The lender or settlement agent must provide you with the Closing Disclosure at least 3 business days before your closing date.

Certain changes made to the Closing Disclosure require the preparation of a new disclosure form. Plus, you must be given a new 3-day waiting period before your closing. These changes include:

• An APR increase of more than 1/8 of a percentage point for fixed rate loans.
• An APR increase of more than 1/4 of a point for adjustable rate loans.
• The addition of a pre-payment penalty.
• A change to loan product, such as a change from a variable to a fixed rate mortgage.

Any other changes, that don’t include the above, will also prompt the preparation of a new Closing Disclosure form. However, you will not be given a new waiting period. And the Closing Disclosure can be given to you at closing.

If any changes occur after closing that cause a change to the amount you paid compared to the amount listed in the final Closing Disclosure, you should also receive a new form.

What additional information should I know?

Refer to the CFPA “Know Before You Owe” mortgage information page for additional information regarding the Loan Estimate and the Closing Disclosure forms.

When you work through a mortgage broker, like Grandview Lending in Indianapolis, our mortgage specialists can help you stay on top of the mortgage application process, so all documents and changes are received within the required timeframes. Otherwise, you may experience delays in receiving the Loan Estimate or the Closing Disclosure forms or put undue stress on your lender. If you have any questions about the TRID rule or the Loan Estimate or Closing Disclosure forms, please contact our mortgage experts who will be happy to provide you with answers.

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