By Dean Hartman

On October 3, 2015, as a result of the mandates imposed by Dodd-Frank, TRID (TILA RESPA Integration Disclosure) went into effect. On that fateful Monday, much of the “how the real estate finance business is done” changed. This piece is intended to give you some of the highlights. It is, in no way, everything, but instead, a solid starting point.

1) First, the current GFE (Good Faith Estimate), TIL (Truth-In-Lending) and Servicing Disclosures are being scrapped and replaced by the new LE (Loan Estimate). The new form is simpler and more logical than its predecessors. Some highlights about the new form are:

• Page 1 has general information (date, address, etc.), a Loan Term Table (Interest Rate, Loan Amount, monthly P&I, any pre-payment penalty and/or balloon, etc.), a Projected Payment Table (P&I, MI, estimated total payment), and a Costs at Closing Table.
• Page 2 has an itemization of closing costs, as well as a calculation of the amount of cash needed to close. If the mortgage is an adjustable, rate loan, there will be additional tables that show how the rate/payment may change and the resulting changes to the P&I.
• Page 3 has all the contact information for the parties, a Comparison Table that will demonstrate the real interest and principal paid in the first five years as a percentage of the payment (as opposed to the old “here’s what you are going to pay if you keep the loan for the full term), and other considerations of the loan (such as, being adjustable, if it is), and a signature statement that acknowledges receipt of the LE, which is not equivalent to the Intent to Proceed.

2) Second, the HUD-1 Settlement Statement, Final TIL and Itemization of Amount Financed disclosures are being replaced by the CD (Closing Disclosure).

• Page 1 has the general info, the Loan Terms Table, the Projected Payments Table, and the Costs at Closing Table
• Page 2 if the closing costs breakdown (loan costs and other costs) for bout the buyer and seller
• Page 3 gives both the total cash needed to close and a summary of all the previous tables
• Page 4 is an overview of many of the disclosures, and if the loan is an adjustable, all the factors of the potential adjustments
• Page 5 has more disclosures, who to register complaints with, contact information of the parties, and a signature section to confirm receipt of the form

With the new forms comes some new workflow considerations and timelines, best demonstrated by an example:

• First assume the lender is closed on Saturday and Sunday. From a LE perspective “Business Days” are defined as days the lender is open to the public for carrying out substantially all of its business functions. Meanwhile, as far as a CD is concerned, “Business Days” are all calendar days, except Sunday and Federal Holidays.
• As an example…Application received on Tuesday, October 4th, 2015. Lender must issue (via e-mail, snail mail or hand) the LE within 3 business days—or Friday, October 7th. During the 3 days, the lender MAY request verifying information from the applicant.
• The delivery of the LE begins a 7 business day trigger before there can be a closing date; therefore, the earliest potential closing date is Monday, October 17th.
• After receiving the LE, the borrower has 10 calendar days to send the lender an Intent to Proceed statement.
• Now a wrinkle- There is a Change of Circumstance (renegotiation of terms after the appraisal, loan program change, etc.), the lender has a new 3 day period to issue a new LE.
• THE BIG CHANGE….the CD must be delivered (with proof of delivery) to the borrower FOUR Business Days prior to a closing. Lenders can e-mail, snail mail, fax or hand-deliver the CD, but in either case, they must register PROOF/ACKNOWLEDGEMENT of receipt by the borrower. The days of clearing a loan to closing and closing that day (or the next day, or the day after that) are over. The end-of-month rushes will become the third week of the month rushes. Lender costs (including short interest and more), final title bills and any other charges that could impact the APR must all be into the lender’s closing department a minimum of four days prior to closing.
• Once the CD is produced, there can be NO CHANGES to it (like a change in rate or APR, different loan product, adding a pre-payment penalty, or loan charges being changed, as examples). If changes need to be made, a new CD is produced and there is an additional 3 day waiting period before closing and the lender must re-prove delivery of the new CD.

With TRID, comes a few more items of note:

• We now have a clear definition of the six mandatory components of an application that trigger the requirement of a LE- name, social security number, income, loan amount sought, estimate property value, and property address.
• TRID prohibits lenders from requiring income documentation prior to issuing a LE. They must accept the borrower’s verbal claims to their income. Yes, this is insane and can render Pre-Approvals virtually meaningless.
  In the end, we will all adjust to the changes over a couple months, but, especially in the short run, the “less-than-excellent” attorneys, real estate agents and loan professionals, are certain to mess things up and create even more delays. During the transition of workflows, the communication level between the professionals must increase dramatically, as to not overly inconvenience our clients.