TRID - New Regulations

Closing Disclosure and Mortgage Estimate - New Forms and Rules for real estate loans and settlements
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New National Regulations for Real Estate Loans and Closings

TRID (Truth in Lending Respa Intergrated Disclosure)– new law began October 2015

Please note that the national portion of the salesperson exam will have questions on TRID starting 2016.  Before the new PSI exam is released in 2016, those questions on TRID will be in testing phase and not count toward you final score.  After the new PSI exam is released, they will count.  The date of the new PSI exam release is not known.  Therefore, it is important to know these new regulations  If you have any questions regarding this new law, contact VaRealtySchool.com or instructor Paul Hartke at paulhartke22@gmail.com. Short Summary (summarized by Paul Hartke for highest importance for PSI exam) 2 New Forms:  Consumer Financial Protection Bureau (CFPB), not HUD, combined the 2 new forms. New settlement sheet:  HUD-1 form (old form) replaced by Closing Disclosure (CD, new form) New loan disclosure:  Good Faith Estimate (GFE, old form) replaced by Loan Estimate (LE, new form) Loan applications:  Lender must provide Loan Estimate (LE) within 3 days of loan application. Then borrower has 10 days to respond on whether to agree to go ahead with the loan. Lender may obtain credit report but, strangely, is not allowed to verify income prior to providing the LE. Closing Disclosure:  Required to be provided to buyer at least 3 days before closing can occur. Lender must have proof of receipt that borrower received the Closing Disclosure. Changes to Closing Disclosure (if it changes the APR %, the type of loan or prepayment penalty): Requires another 3 day waiting period before settlement can occur. The result of the new regs:  Some settlements may now have delays due to these required waiting periods and licensees should allow more time for the settlement date that is required to be stated in sales contracts.  What will be on the PSI exam:  My summary may not include all potential PSI exam questions.   See the detailed regulations provided by PSI for more information. Detailed Regulations (provided by PSI) In November 2013, the Consumer Financial Protection Bureau (CFPB) integrated the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures and regulations. The new TILA-RESPA Integrated Disclosure (TRID) forms were implemented on October 3, 2015.  In anticipation of this change, the current PSI National Sales and Broker exams have been silent for several months on the new forms and rules related to the timing of disclosures and provision of estimates regarding real estate mortgage loans.  Now that the new TRID Rule has taken effect, new items to address it have been added to the exams in a pretest (unscored) status to gather candidate performance statistics. Items that perform well statistically will be incorporated as scored items on the National Broker exams when the exams are republished in January 2016 and to the National Sales exams when they are republished later in 2016.  The following basic information about the new integrated disclosure may be helpful to you in planning to include the new TRID Rule in your courses. WHAT IS TRID? This acronym stands for TILA-RESPA Integrated Disclosures and refers to new forms that will replace the current HUD-1 form, the Good Faith Estimate and the existing Truth-in-Lending (TIL) disclosures.  These forms integrate the existing disclosures with new provisions of the Dodd-Frank Act intended to make the mortgage process clearer to consumers.  As a result of this new rule, two new forms will be used for essentially all real estate transactions involving a new closed-end consumer mortgage application. These new forms are called the Loan Estimate (LE) and the Closing Disclosure (CD). The Loan Estimate replaces the Good Faith Estimate (GFE) and the initial TIL disclosure.  It provides somewhat more and clearer information to consumers to make comparison shopping easier and to ensure that consumers understand loan and closing costs.  The Loan Estimate must be provided to the consumer within three days of the submission of a loan application, and the consumer must acknowledge receiving it. The Closing Disclosure replaces the HUD-1 and the final TIL disclosure, and the TIL forms that summarized both TIL disclosures. The Closing Disclosure must be received by the consumer three days before closing, and the lender must have proof of receipt. It is the lender who is responsible for the timely delivery of documents to the consumer, and who may also be liable if certain costs exceed the tolerance limitations that TRID establishes, so it changes the relationship between lenders and mortgage brokers.  TRID also increases the likelihood of transactions being delayed, because certain changes that might occur between the delivery of the Closing Disclosure and the closing date will trigger a new 3-day waiting period. WHAT TRANSACTIONS ARE AFFECTED? As noted above, nearly all closed-end consumer mortgage loans will require the use of the new TRID forms and adherence to the deadlines they prescribe.  They are to be used on all new loan applications received by lenders.  The new forms became mandatory on October 3, 2015. The TRID rule does not apply to 1. HELOCS (Home Equity Lines of Credit) 2. Mortgages secured by mobile homes or other “movable” dwellings that are not permanently attached to real estate 3. Reverse mortgages WHAT DO REAL ESTATE LICENSEES NEED TO KNOW? TRID does not impose any specific responsibilities upon real estate brokers or salespersons, but it changes some aspects of mortgage lending and closing in ways that real estate agents need to understand in order to educate their clients and manage transactions without undue delays.  They also need to know the names and functions of the new forms and how they correspond to the forms they are replacing so that they can discuss them knowledgeably, especially with clients and customers who have been involved in previous real estate transactions and may have questions about the “missing” forms that will no longer be used and the unfamiliar new documents. The key issue is that the disclosures required by the new TRID rule will change the timing for transactions that involve a mortgage.  The potential for various delays is much greater than in the past and real estate licensees need to caution their clients and customers.  PSI does NOT claim to have the expertise to project potential issues, but other experts have predicted the following likely changes in the way transactions are handled: The Closing Disclosure is likely to be prepared and delivered by the lender, not an escrow company or the closing agent. The Closing Disclosure will be provided to the closing agent by the lender, but the closing agent may not send a copy to the real estate agent.  A real estate licensee who is not the closing agent will need to obtain the CD from the lender or the borrower in order to review it in advance.  Real estate licensees who act as closing agents (or who provide instructions to escrow companies that handle their closings) will need to be sure that the lender receives all necessary information about 10 to 14 days before the closing date in order to be confident that the Closing Disclosure can be prepared and delivered to the buyer at least three business days before the scheduled closing.  This will include information on any buyer-paid charges, seller-paid charges and the license numbers of the real estate brokerage company and the individual licensee handling the transaction. The Loan Estimate must be provided within three business days of receiving the loan application, and the prospective borrower then has 10 days to respond as to whether he or she wishes to proceed.  Although the lender may pull a credit report, the lender is NOTpermitted to verify or document the loan applicant’s claimed income before providing the Loan Estimate.  This may mean that initial “prequalification” of a borrower becomes fairly meaningless! It may not be realistic to specify a 30-day closing under the new TRID rule.  Contract forms should be reviewed and adjusted if they specify a set number of days for the closing to occur – adding 15 additional days would be prudent, and specifying a particular closing date would need to involve communication with the lender to determine what is realistic.  Any significant change to the loan (e.g. a different loan product, a change in APR, the addition of a prepayment penalty) triggers a new 3-day waiting period for the CD.  Last minute negotiations will pose a significant risk of delaying closing. Scheduling back-to-back closings when the sale of one property is a contingency in the contract for another property may not be wise as the risk of delay in the first transaction becomes higher. WHAT WILL PSI TEST? PSI will test at least, but not necessarily ONLY, the following: *The names and purposes of the new forms, and possibly the forms they replace. *The time limits and receipt acknowledgement for delivery of the LE and the CD. *The changes that can trigger new waiting periods, and the risk of delay posed by making any contract changes after delivery of the CD HOW CAN I LEARN MORE? The following web pages from the National Association of Realtors and the Consumer Finance Protection Bureau contain a great deal of additional information about the new TRID rule and are considered by PSI to be authoritative. http://www.realtor.org/topics/trid-tila-respa-integrated-disclosure http://files.consumerfinance.gov/f/201503_cfpb_tila-respa-integrated-disclosure-guide-to-the-loan-estimate-and-closing.pdf
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TRID - New

Regulations

Closing Disclosure and Mortgage Estimate - New Forms and Rules for real estate loans and settlements
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New National Regulations for Real Estate

Loans and Closings

TRID (Truth in Lending Respa Intergrated

Disclosure)– new law began October 2015

Please note that the national portion of the salesperson exam will have questions on TRID starting 2016.  Before the new PSI exam is released in 2016, those questions on TRID will be in testing phase and not count toward you final score.  After the new PSI exam is released, they will count.  The date of the new PSI exam release is not known.  Therefore, it is important to know these new regulations  If you have any questions regarding this new law, contact VaRealtySchool.com or instructor Paul Hartke at paulhartke22@gmail.com. Short Summary (summarized by Paul Hartke for highest importance for PSI exam) 2 New Forms:  Consumer Financial Protection Bureau (CFPB), not HUD, combined the 2 new forms. New settlement sheet:  HUD-1 form (old form) replaced by Closing Disclosure (CD, new form) New loan disclosure:  Good Faith Estimate (GFE, old form) replaced by Loan Estimate (LE, new form) Loan applications:  Lender must provide Loan Estimate (LE) within 3 days of loan application. Then borrower has 10 days to respond on whether to agree to go ahead with the loan. Lender may obtain credit report but, strangely, is not allowed to verify income prior to providing the LE. Closing Disclosure:  Required to be provided to buyer at least 3 days before closing can occur. Lender must have proof of receipt that borrower received the Closing Disclosure. Changes to Closing Disclosure (if it changes the APR %, the type of loan or prepayment penalty): Requires another 3 day waiting period before settlement can occur. The result of the new regs:  Some settlements may now have delays due to these required waiting periods and licensees should allow more time for the settlement date that is required to be stated in sales contracts.  What will be on the PSI exam:  My summary may not include all potential PSI exam questions.   See the detailed regulations provided by PSI for more information. Detailed Regulations (provided by PSI) In November 2013, the Consumer Financial Protection Bureau (CFPB) integrated the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures and regulations. The new TILA-RESPA Integrated Disclosure (TRID) forms were implemented on October 3, 2015.  In anticipation of this change, the current PSI National Sales and Broker exams have been silent for several months on the new forms and rules related to the timing of disclosures and provision of estimates regarding real estate mortgage loans.  Now that the new TRID Rule has taken effect, new items to address it have been added to the exams in a pretest (unscored) status to gather candidate performance statistics. Items that perform well statistically will be incorporated as scored items on the National Broker exams when the exams are republished in January 2016 and to the National Sales exams when they are republished later in 2016.  The following basic information about the new integrated disclosure may be helpful to you in planning to include the new TRID Rule in your courses. WHAT IS TRID? This acronym stands for TILA-RESPA Integrated Disclosures and refers to new forms that will replace the current HUD-1 form, the Good Faith Estimate and the existing Truth-in- Lending (TIL) disclosures.  These forms integrate the existing disclosures with new provisions of the Dodd-Frank Act intended to make the mortgage process clearer to consumers.  As a result of this new rule, two new forms will be used for essentially all real estate transactions involving a new closed- end consumer mortgage application. These new forms are called the Loan Estimate (LE) and the Closing Disclosure (CD). The Loan Estimate replaces the Good Faith Estimate (GFE) and the initial TIL disclosure.  It provides somewhat more and clearer information to consumers to make comparison shopping easier and to ensure that consumers understand loan and closing costs.  The Loan Estimate must be provided to the consumer within three days of the submission of a loan application, and the consumer must acknowledge receiving it. The Closing Disclosure replaces the HUD-1 and the final TIL disclosure, and the TIL forms that summarized both TIL disclosures. The Closing Disclosure must be received by the consumer three days before closing, and the lender must have proof of receipt. It is the lender who is responsible for the timely delivery of documents to the consumer, and who may also be liable if certain costs exceed the tolerance limitations that TRID establishes, so it changes the relationship between lenders and mortgage brokers.  TRID also increases the likelihood of transactions being delayed, because certain changes that might occur between the delivery of the Closing Disclosure and the closing date will trigger a new 3-day waiting period. WHAT TRANSACTIONS ARE AFFECTED? As noted above, nearly all closed-end consumer mortgage loans will require the use of the new TRID forms and adherence to the deadlines they prescribe.  They are to be used on all new loan applications received by lenders.  The new forms became mandatory on October 3, 2015. The TRID rule does not apply to 1. HELOCS (Home Equity Lines of Credit) 2. Mortgages secured by mobile homes or other “movable” dwellings that are not permanently attached to real estate 3. Reverse mortgages WHAT DO REAL ESTATE LICENSEES NEED TO KNOW? TRID does not impose any specific responsibilities upon real estate brokers or salespersons, but it changes some aspects of mortgage lending and closing in ways that real estate agents need to understand in order to educate their clients and manage transactions without undue delays.  They also need to know the names and functions of the new forms and how they correspond to the forms they are replacing so that they can discuss them knowledgeably, especially with clients and customers who have been involved in previous real estate transactions and may have questions about the “missing” forms that will no longer be used and the unfamiliar new documents. The key issue is that the disclosures required by the new TRID rule will change the timing for transactions that involve a mortgage.  The potential for various delays is much greater than in the past and real estate licensees need to caution their clients and customers.  PSI does NOT claim to have the expertise to project potential issues, but other experts have predicted the following likely changes in the way transactions are handled: The Closing Disclosure is likely to be prepared and delivered by the lender, not an escrow company or the closing agent. The Closing Disclosure will be provided to the closing agent by the lender, but the closing agent may not send a copy to the real estate agent.  A real estate licensee who is not the closing agent will need to obtain the CD from the lender or the borrower in order to review it in advance.  Real estate licensees who act as closing agents (or who provide instructions to escrow companies that handle their closings) will need to be sure that the lender receives all necessary information about 10 to 14 days before the closing date in order to be confident that the Closing Disclosure can be prepared and delivered to the buyer at least three business days before the scheduled closing.  This will include information on any buyer-paid charges, seller-paid charges and the license numbers of the real estate brokerage company and the individual licensee handling the transaction. The Loan Estimate must be provided within three business days of receiving the loan application, and the prospective borrower then has 10 days to respond as to whether he or she wishes to proceed.  Although the lender may pull a credit report, the lender is NOTpermitted to verify or document the loan applicant’s claimed income before providing the Loan Estimate.  This may mean that initial “prequalification” of a borrower becomes fairly meaningless! It may not be realistic to specify a 30-day closing under the new TRID rule.  Contract forms should be reviewed and adjusted if they specify a set number of days for the closing to occur – adding 15 additional days would be prudent, and specifying a particular closing date would need to involve communication with the lender to determine what is realistic.  Any significant change to the loan (e.g. a different loan product, a change in APR, the addition of a prepayment penalty) triggers a new 3-day waiting period for the CD.  Last minute negotiations will pose a significant risk of delaying closing. Scheduling back-to-back closings when the sale of one property is a contingency in the contract for another property may not be wise as the risk of delay in the first transaction becomes higher. WHAT WILL PSI TEST? PSI will test at least, but not necessarily ONLY, the following: *The names and purposes of the new forms, and possibly the forms they replace. *The time limits and receipt acknowledgement for delivery of the LE and the CD. *The changes that can trigger new waiting periods, and the risk of delay posed by making any contract changes after delivery of the CD HOW CAN I LEARN MORE? The following web pages from the National Association of Realtors and the Consumer Finance Protection Bureau contain a great deal of additional information about the new TRID rule and are considered by PSI to be authoritative. http://www.realtor.org/topics/trid-tila-respa-integrated- disclosure http://files.consumerfinance.gov/f/201503_cfpb_tila-respa- integrated-disclosure-guide-to-the-loan-estimate-and- closing.pdf
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