TRID Information

James R. Tausché
Senior VP of Residential Lending, 1st Advantage Mortgage
James is a loan officer with more than 20 years of experience in the mortgage industry. He specializes in HARP, Conventional, FHA and jumbo financing.

Now that TRID has been implemented, what documents must homebuyers provide to their lender?
All homebuyers are required to provide the standard income and asset documentation when applying for a loan. These documents include, but are not limited to:

• Two years of W-2s with the corresponding
  federal tax returns
• 30 days of current pay stubs
• 60 days of current bank statements

However, the implementation of TRID has required the lending community to revamp the way it had done business for years. Pre-TRID, the initial conversation with a borrower allowed the loan officer (LO) to not only inquire about a borrower’s income, assets, credit scores, etc., but it also allowed for the LO to request the borrower’s personal information (as stated above) for verification purposes, without disclosing closing costs, even if the borrower had not decided on a lender. After TRID, lenders, by law, cannot require the consumer to provide any credit documentation prior to the lender issuing the borrower a Loan Estimate (LE). The LE is essentially a more detailed and blended version of the Good Faith Estimate and initial Truth in Lending that lenders have been providing to borrowers for decades. Once the LE has been disclosed to the borrower, the lender can then require a complete checklist of the credit documentation required for application.

What changed with TRID? How must closing costs be communicated to the consumer?
The new TRID rule does not change the documentation that is required to be collected from the borrower. It only changes the timeline for the lender being able to require the documentation from the borrower. The closing costs are now initially communicated to the borrower on the LE, which provides a thorough breakdown of all closing costs the borrower will be responsible for paying through closing, along with detailed information about their loan program and monthly payment. The LE also discloses the annual percentage rate (APR) and Total Interest Percentage (TIP), and includes additional disclosures.

Since the new TRID rule will not allow lenders to require the borrower’s credit documentation prior to the issuance of the LE, every lender in the country must now follow the same TRID rules:

1. Issue an LE within three days of receiving an application.
2. Most important part of all, issue the Closing Disclosure (CD) with sufficient time to ensure that the borrower(s) receive the CD at least three business days prior to closing as required by the rule.

The CD combines the final Truth in Lending with what we all know as the HUD-1 Settlement Statement. When the buyer receives their CD three business days in advance of closing, they know exactly what their bottom line is well in advance, paving the way for a smooth closing. It should be noted that information contained on the CD may change prior to the closing, and a revised CD may be issued to the borrower(s) at the time of closing. A new three-day waiting period before closing is only required when the APR has increased by 0.125 percent or more, a pre-payment penalty is added or the loan program has changed – all other changes may be disclosed at the time of closing.

Worst-case scenario: How should agents handle another agent on the other side of the deal who doesn’t understand the new TRID requirements?
The lending community has had to adapt to several industry changes since the mortgage meltdown in 2008, most notably: the inception of the Home Valuation Code of Conduct (HVCC) in 2009, the revised Good Faith Estimate in 2010, and most recently, the TRID rule in 2015. The hard reality is that TRID affects both lenders and agents alike. When all parties work together cooperatively to meet the dates of sending a borrower an accurate LE from the onset, and more importantly, the borrower receiving the CD three business days prior to closing, closings will be completed on time. The TRID rule does not leave any wiggle room for lender interpretation of these dates that must to be met for the buyer.

Agents on both sides of the transaction should be well versed on the topic and willing to assist each other (and the lender) from application to closing. They should also feel comfortable communicating with the lender regarding the status of the loan process as it applies to TRID and the subsequent closing date. As mortgage professionals, we spent months prep aring for TRID and are more than happy to answer any and all questions. In the end, we all have one common goal: a smooth closing with a happy (and informed) buyer, which TRID is actually helping to create.