As someone who has been interested in buying or selling property you may have heard talk lately about new “TILA/RESPA” or “TRID” rules. So what do these acronyms mean and why are they being talked about by lenders, settlement agents, and realtors, to name a few? Will these rules affect me if I am trying to buy or sell real estate?
TILA and RESPA stand for two different government acts that directed two forms that were provided by lenders to buyers/borrowers during a real estate closing. One act was known as the Truth in Lending Act and the other was the Real Estate Settlement Procedures Act of 1974. There was concern that these two forms were difficult to understand, so in 2010 President Obama signed the Dodd-Frank Act into law. This new law required that the information from the two forms be combined into a standardized Loan Estimate Form and Closing Disclosure Form. Thus, the name TRID came to be: TILA/RESPA Integrated Disclosure.
Lenders are now required to provide a Loan Estimate to any buyer/borrower who is seeking financing for a standard residential home purchase. The fee and term names are used on a similar Closing Disclosure form (instead of the old HUD or Settlement Statements) during closing, so the buyer/borrower should understand more easily the costs of the entire transaction. The Closing Disclosure form also has to be delivered to the buyer/borrower three business days prior to closing so they have a chance to review it and ask questions before they reach the closing table. Prior to closing, the settlement agent will also provide a Settlement Statement that will be signed during closing.
As a Seller, the new rules can affect you as well. For instance, it might take a bit more time than before in order for the bank to gain the proper approval for the loan and be ready to close it. The Seller also is provided a shorter, more compact Closing Disclosure form. Though the three-day delivery rule does not apply for seller’s documents, settlement agents will try to deliver the Closing Disclosure and Settlement Statement a few days before closing so there is time for you to review them.
In conclusion, as either party in a real estate transaction, these new rules will affect you, but if you bring your questions or concerns to Lenders, settlement agents, and realtors, they will work together to provide you with the answers and assistance you need through the entire process.