The Truth About Lending: Part 2

[Zack Karp]

Hello BP family,

Thanks to those of you who took time to read my first topic, The Truth About Lending: Part 1, if not here’s a link to it. 

http://www.biggerpockets.com/forums/49/topics/210233-the-truth-about-lending-part-1

Hopefully you were able to take away some handy information.

On to Part 2, “TRID”.

Ok wait, what?  What in the world is a TRID?  I have been doing this for x years, and never heard of a TRID before.  What is this guy talking about, is he making this up?

For some of you, TRID will stand for "The Realestate Investing Delay". Sorry, bad humor. In reality, it stands for TILA / RESPA Integrated Disclosures. Why does this matter to you? Because starting August 1, 2015 (postponed to October 3, but many lenders are still rolling it out 8/1) we now have even more regulation to navigate. No more Good Faith Estimate. No more Truth-In-Lending disclosure. No more HUD-1 settlement statement.

Here's the background. Thanks to the Dodd-Frank Act, we now have the CFPB (Consumer Finance Protection Bureau) which was created in 2010 for the protection of the consumer. Or at least that's the intention. This came after the mortgage meltdown, and now years later they are rolling out new disclosures to replace the GFE, TIL, and HUD-1. You heard correctly, no more HUD-1's. This is supposed to be a good thing, and with any change, there will certainly be a learning curve.

We will now have the LE (Loan Estimate) and the CD (Closing Disclosure). The LE will replace the GFE and initial TIL at the time of application. The CD will replace the final TIL and HUD-1 at closing. Are you following along? Too many acronyms?

The dynamic and content of these forms will be completely different. No more line items on the HUD-1, they are now alphabetical by fee name. There are lots of changes. The APR is being de-emphasized, and we now have a new term, the "TIP" (Total Interest Payment). There's too much to completely cover, but here's the main thing. Everything must be disclosed properly and at a specific time, and there will be no more "rush" closings. There are new rules in regards to timing requirements. The LE must be delivered within 3 business days of application and at least 7 business days prior to closing. The CD must be delivered 3 business days prior to closing and cannot change. So there will be no more title companies preparing docs the day before closing. If anything changes (fee, charges, terms, etc), the clock starts all over and you have to wait 3 more days to close.

So how do you deal with this, and why does it matter to you?  Make sure to align yourself with a loan officer and lender that knows what they are doing with the new TRID changes.  Otherwise, your closing could be delayed days or even weeks, and there is nothing you can do about it.  That's right, there is nothing you can do about it.  There are going to be a lot of unhappy buyers, sellers, and realtors until this process becomes natural.  Plan ahead.  If you are participating in a real estate transaction with financing, know TRID and know what to expect.

For more information, the internet is your friend.  Take some time to understand TRID.  The CFPB has a ton of info on their website.  Ask your lender about it, and if they dismiss or downplay it, you may be working with someone who isn't compliant-ready or prepared for this global change.  Time is money in our world, and this can be a relationship killer to you and your partners if your lender or loan officer messes this up for you.

I wrote this as unbiased as I could, with my own personal views aside, and I ask that we please don’t turn this into a government bashing thread.  I welcome any questions or comments, and I hope you find this information useful.  Best of luck and happy investing!