Home Financing Changes

by Maribeth Lynch

Buying a Home in Massachusetts

Home Financing Is Undergoing a Change


Maribeth Lynch, Thrive Real Estate Specialists

Just this week, the Consumer Financial Protection Bureau (CFPB) implemented a new mortgage regulation called TRID, and if you’re thinking about buying a new house, you’ll want to know what will change with this new regulation in place. Understanding the lingo involves decoding a lot of acronyms, but don’t let the jargon scare you! Let me help simplify it.

The new mortgage regulation, TRID, stands for TILA-RESPA Integrated Disclosures.

Disclosures are loan fee estimates provided to a borrower during the loan process. TILA-RESPA refers to the two federal statutes that have governed loan forms for more than 30 years. TILA stands for the Truth in Lending Act, and RESPA stands for the Real Estate Settlement Procedures Act. These two statutes produced closing paperwork with inconsistent language and confusing redundancies. TRID is designed to condense the paperwork into two new, more intuitive forms with clear language that a home buyer can easily understand.

Under TRID, lenders will now be required to provide borrowers with two new disclosures: the loan estimate (LE) and the closing disclosure (CD):

  • The LE, provided to the borrower three days after submission of a loan application, lays out the terms of the loan in whole dollar figures, with all fees alphabetized so that buyers can easily compare rates and fees among multiple lenders. The LE expires within 10 days unless the borrower decides to lock in financing. The LE also specifies whether any of the terms of the loan are subject to change after close.
  • The CD, provided to the borrower three days prior to close, reflects the actual charges attached to the loan rather than the estimated fees listed on the LE, so fee amounts are listed in more exact amounts rather than whole-dollar estimates. It also specifies how much cash is needed to close. Again, fees are specified in an easy-to-read alphabetized layout. If any of the terms of the loan do change after close, the lender is required to provide the borrower with a new CD within 30 days following close; any necessary refunds from the lender must be delivered to the buyer within 60 days following close.

So, as you can see, TRID is designed to protect consumers. Under TRID, the new disclosures help simplify the loan process for home buyers. Some industry professionals are actually starting to refer to it as the “Know Before You Owe” rule. TRID reduces the paperwork that a home buyer must sort through and makes the terms of the mortgage easier to understand. It also gives the buyer ample time to look over the CD in order to make certain everything is satisfactory with the final terms of the loan.

Some people are concerned that the stricter timeline required by TRID might delay closings or lengthen the loan process, but in reality, there are only a couple of circumstances in which the CD would have to be entirely rewritten, re-starting the three-day waiting period prior to close. TRID does not alter the requirements to qualify for a loan; home buyers are still going to require healthy credit and an attractive debt-to-income ratio to qualify for most loans.

Overall, I think that lenders, home buyers, and agents will adjust to the new regulations fairly quickly. If TRID does its job, we should see more transparency in the lending process, which should lead to fewer home purchases encountering last-minute snags.

Would you like to know more? Visit www.thriverealtors.com for more information!

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