TRID – TILA-RESPA Integrated Disclosure

With earlier mortgage we might have seen and signed GFE – Good Faith Estimate and TIL – Truth in Lending documents. However you will no longer see these documents being disclosed on new mortgage loans that you might apply in future.

On mortgage loan applications received on or after October 3 2015 TIL and GFE are to be replaced by two new disclosures, LE – Loan Estimate and CD – Closing Disclosure under TRID rule.

TRID stands for TILA-RESPA Integrated Disclosure which aims to integrate TIL, GFE and HUD1 to facilitate better understanding and direct comparison of the offering by lenders.

LE is to be disclosed and signed at application stage which integrates initial TIL and GFE giving an estimate of total cost on the loan. While CD integrates final TIL and HUD1 with actual cost on loan that borrower ends up paying and is disclosed and signed at closing. HUD1 is financial statement which summarizes mortgage transaction at closing.

LE is to be provided within three business days of the application while CD has to go out 3 days before closing. In these newly integrated documents you might see same set of information that was been included earlier in TIL, GFE and HUD1. So how it’s different? How it helps the borrower to compare different mortgage offerings?

Well, page 3 of LE provides a comparison table giving an estimate of total money that borrower would pay lender in next 5 years including principle, interest, mortgage insurance and closing cost. This is also converted to rate called as APR – Annual Percentage Rate which is higher than interest rate since its a total cost on loan and not just the interest paid on the loan. Higher the APR more is the cost on the loan and same can be compared to make buying decision.

Comparison Table on Page 3 of Loan Estimate

le-image

Based on the provided comparison table in LE borrower might decide to go with particular offer, however before closing one should look into loan calculations on page 5 of closing disclosure provided 3 days prior to closing. This table on CD can directly be compared with latest disclosed LE to see if loan actually stands to commitment.

Loan Calculations on page 5 of Closing Disclosures

cd

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