For more than 30 years, federal law has required mortgage lenders to provide two different disclosure forms to their borrowers after applying for a mortgage and two different forms at or shortly before closing on their mortgage loan.
Starting October 3, 2015, lenders will abide by a new set of disclosure rules, known as TILA RESPAIntegrated Disclosures (TRID). Here's how the new rules will affect the types and timeliness of disclosures you receive during the loan process.
The New Loan Estimate Form
This form is designed to provide disclosures that will be helpful to borrowers in understanding certain features, costs and risks of the mortgage for which they have applied for. The Loan Estimate form replaces the current Good Faith Estimate (GFE) and Truth-in-Lending (TIL) and will include more fee details, as well as an Estimated Cash-to-Close sheet.
Your mortgage lender is required to deliver the Loan Estimate within three business days (Monday - Friday, excluding federal holidays) after application, which is the same requirement currently. An application is considered complete when the borrower provides their lender with the following information:
- Borrower's name
- Borrower's income
- Borrower's Social Security number for obtaining a credit report
- Address of the property
- Estimate of the value of the property
- Loan amount desired
If circumstances change after application, a revised Loan Estimate must be delivered by your lender no more than three business days after a changed circumstance has occured and no less than four business days prior to closing.
The New Closing Disclosure Form
This form is designed to provide disclosures that will be helpful to borrowers in understanding the costs of their mortgage transaction, including key information such as interest rate, monthly payments, and costs to close the loan. The Closing Disclosure form will replace the current HUD-1 and final Truth-in-Lending (TIL) forms.
Your lender is required to deliver the Closing Disclosure at least three business days (Monday - Saturday, excluding federal holidays) prior to closing and must contain all final costs, though limited changed circumstances are allowed. A Closing Disclosure is considered "received" if the disclosure is signed and dated in person or a receipt of delivery is obtained via e-mail read receipt or through a dated confirmation of overnight delivery (i.e. via FedEx).
For example, if your loan is scheduled to close on a Wednesday, you must receive your Closing Disclosure by the preceding Saturday, granted none of the preceding weekdays are federal holidays. If there is no confirmation of receipt, your lender must wait an additional three days to close.
Compass Mortgage and the New TRID Changes
To comply with the new TRID disclosure rules and ensure timeliness of closing dates, Compass will require a clear-to-close of your home loan no more than six TRID business days prior to your expected closing date. Compass will also be preparing the new Closing Disclosure ourselves as opposed to the title company who currently prepares the HUD-1.
If you have any questions about TRID and the new law affecting any new loan application starting October 3rd, please contact one of our mortgage bankers.
For additional information about the homebuying and home financing process, download our free Mortgage 101 Handbook, a great resource for first-time homebuyers.