TRID Rule Overview
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Questions and Answers

What is the main purpose of the TRID rule?

  • To simplify the loan process for lenders
  • To regulate the fees charged by settlement agents
  • To eliminate all previous disclosure requirements
  • To integrate mortgage disclosures for better consumer understanding (correct)

Which two disclosure forms were replaced by the Loan Estimate under TRID?

  • Good Faith Estimate and HUD 1 Settlement Statement (correct)
  • Final Truth-in-Lending Disclosure and HUD 1 Settlement Statement
  • Good Faith Estimate and Final Truth-in-Lending Disclosure
  • Initial Truth-in-Lending Disclosure and HUD 1 Settlement Statement

Who is responsible for the accuracy of the Loan Estimate and Closing Disclosure?

  • The CFPB
  • Settlement agents
  • The borrower
  • Lenders (correct)

Which type of loans is NOT covered by the TRID rule?

<p>HELOCs (D)</p> Signup and view all the answers

What does the Closing Disclosure replace under TRID?

<p>Final Truth-in-Lending Disclosure and HUD 1 Settlement Statement (C)</p> Signup and view all the answers

Which entity is responsible for the Seller Closing Disclosure on purchase transactions?

<p>The settlement agent (B)</p> Signup and view all the answers

What new form is required for refinance transactions under the TRID rules?

<p>Loan Estimate (C)</p> Signup and view all the answers

What is a key requirement for lenders regarding the TRID forms?

<p>Lenders must use CFPB-provided forms without adaptations (A)</p> Signup and view all the answers

What must lenders provide to applicants within three business days of application?

<p>The 'Your Home Loan Toolkit' booklet (D)</p> Signup and view all the answers

Which of the following is NOT a requirement for mortgage lenders under the CFPB rules?

<p>Delivering the HUD Special Information booklet (A)</p> Signup and view all the answers

What is an Affiliated Business Disclosure?

<p>A disclosure listing settlement service providers and their affiliations (D)</p> Signup and view all the answers

When must mortgage lenders provide a free copy of all appraisals to the applicant?

<p>After the appraisal report is completed but before closing (D)</p> Signup and view all the answers

What does the Annual Escrow Account Statement provide for the loan servicer?

<p>An accounting of receipts and disbursements from the escrow account (A)</p> Signup and view all the answers

What is included in the loan costs incurred by the borrower?

<p>Lender charges and third-party charges associated with obtaining the loan (A)</p> Signup and view all the answers

What is the Annual Percentage Rate (APR)?

<p>The cost the borrower pays each year to borrow money, including fees. (B)</p> Signup and view all the answers

Which of the following describes a 'zero tolerance' category under the TRID rule?

<p>Changes can only occur if there has been a change of circumstances (D)</p> Signup and view all the answers

What does 'initial escrow payments at closing' primarily cover?

<p>Setting up the borrower's monthly escrow for taxes, insurance, and mortgage insurance (C)</p> Signup and view all the answers

Which option is considered a 'changed circumstance' under TRID?

<p>The lender receiving new information not previously disclosed. (A)</p> Signup and view all the answers

How are lender credits treated concerning total closing costs?

<p>They are deducted from the total closing costs (A)</p> Signup and view all the answers

How must the lender document a consumer's intent to proceed?

<p>By documenting the stated intent in writing. (B)</p> Signup and view all the answers

What does the Total Interest Percentage (TIP) measure?

<p>How much interest the borrower will pay over the life of the loan. (A)</p> Signup and view all the answers

Which document must be provided separately from the Loan Estimate when the borrower can shop for settlement services?

<p>Settlement Service Providers List (A)</p> Signup and view all the answers

Within what time frame must the Loan Estimate be delivered to the consumer?

<p>Within three business days of application receipt. (C)</p> Signup and view all the answers

Which of the following would NOT be considered a valid changed circumstance under the TRID rule?

<p>The borrower provided false information about income (C)</p> Signup and view all the answers

What is the purpose of comparing the Loan Estimate to other Loan Estimates?

<p>To assist the borrower in understanding the overall loan costs (A)</p> Signup and view all the answers

What constitutes an 'application' under RESPA requirements?

<p>The collection of six specific pieces of information. (A)</p> Signup and view all the answers

What important content is included on Page 1 of the Loan Estimate?

<p>General loan information and borrower identification. (D)</p> Signup and view all the answers

What is the aggregate tolerance for changes allowed within the ten percent category under TRID?

<p>Ten percent above the disclosed aggregate total (A)</p> Signup and view all the answers

What must lenders ensure regarding the costs and fees disclosed in the Loan Estimate?

<p>They disclose in good faith based on the best available information (D)</p> Signup and view all the answers

When can a consumer modify or waive the seven-business-day waiting period for loan consummation?

<p>In case of a bona fide personal financial emergency. (C)</p> Signup and view all the answers

What type of charges fall into the 'No Tolerance' category under TRID?

<p>Prepaid interest and property insurance premiums (B)</p> Signup and view all the answers

Which of the following loans is not subject to RESPA?

<p>Loans secured by vacant land. (C)</p> Signup and view all the answers

Which criteria must be fulfilled for a lender to provide a Loan Estimate?

<p>The lender must have the six pieces of information defined by RESPA. (A)</p> Signup and view all the answers

When should a revised Loan Estimate be issued due to changed circumstances?

<p>Within 3 business days of awareness of change (A)</p> Signup and view all the answers

What defines a 'business day' for the Loan Estimate under TRID?

<p>Any day the office is open to the public for business. (A)</p> Signup and view all the answers

Which of the following is NOT a valid reason for changes in loan charges?

<p>Borrower's decision to back out of the loan (A)</p> Signup and view all the answers

What must happen to settlement service fees if the lender chooses the service provider?

<p>They must be disclosed in the Loan Estimate (C)</p> Signup and view all the answers

Which of the following is true regarding mortgage brokers providing the Loan Estimate?

<p>Brokers can provide it, but lenders remain accountable for defects. (C)</p> Signup and view all the answers

Which statement regarding Loan Estimate delivery methods is correct?

<p>Electronic delivery can be used only if consumer consent is obtained. (C)</p> Signup and view all the answers

What is the significance of the APR disclosed in the Loan Estimate?

<p>It reflects the true cost of borrowing expressed as an annual rate (D)</p> Signup and view all the answers

What must occur if a lender needs to issue a revised Loan Estimate (LE) due to a change of circumstances?

<p>It must be issued at least 4 days prior to consummation. (A)</p> Signup and view all the answers

When must a lender ensure that the borrower receives the Closing Disclosure (CD)?

<p>At least three business days before consummation. (A)</p> Signup and view all the answers

Which scenarios allow lenders to make corrections to a Closing Disclosure after it has been issued?

<p>Inaccuracies discovered post-closing. (C)</p> Signup and view all the answers

What is necessary for a borrower to modify or waive the three-day waiting period after receiving the Closing Disclosure?

<p>A written statement describing the emergency. (A)</p> Signup and view all the answers

How does a revised Closing Disclosure affect tolerance limits?

<p>It resets the tolerance limits. (A)</p> Signup and view all the answers

What can be provided as a 'cure' for tolerance violations?

<p>A refund directly to the consumer. (D)</p> Signup and view all the answers

What is the maximum number of days a lender has to issue a corrected Closing Disclosure after learning about the need for a revision?

<p>3 business days. (D)</p> Signup and view all the answers

Which of the following is included on Page 5 of the Closing Disclosure?

<p>Contact information for the lender. (D)</p> Signup and view all the answers

Under what circumstances can a borrower legitimately waive the three-day waiting period for the Closing Disclosure?

<p>In cases of a bona fide personal financial emergency. (C)</p> Signup and view all the answers

When does the right of rescission begin for rescindable transactions after providing the Closing Disclosure?

<p>Three business days after the CD is provided. (C)</p> Signup and view all the answers

Which of the following statements regarding the Loan Estimate and Closing Disclosure is true?

<p>A revised LE can affect previously disclosed charges. (B)</p> Signup and view all the answers

What additional disclosures are found on the Closing Disclosure that were not on the Loan Estimate?

<p>Total of Payments and Finance Charge. (B)</p> Signup and view all the answers

Which of the following should a lender NOT do when a Closing Disclosure needs correction?

<p>Make corrections via verbal agreement. (B)</p> Signup and view all the answers

What main purpose does the Closing Disclosure serve?

<p>It is the final disclosure reflecting the actual terms of the transaction. (B)</p> Signup and view all the answers

Flashcards

TRID Rule

The TILA-RESPA Integrated Disclosure Rule (TRID), also known as the "Know Before You Owe" rule, integrates mortgage disclosures for consumers.

Loan Estimate

The document that replaces the Good Faith Estimate and initial Truth-in-Lending disclosure, providing estimated loan terms.

Closing Disclosure

The document that replaces the HUD-1 settlement statement and final Truth-in-Lending disclosure, providing final loan terms.

Lender Responsibility (TRID)

Lenders are fully responsible for the accuracy of both Loan Estimate and Closing Disclosure.

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Settlement Agent Responsibility

Settlement agents (in purchase transactions) are responsible only for the accuracy of Seller Closing Disclosure.

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CFPB-provided Forms

Specific forms are provided by CFPB, and no adaptations are allowed for federally related mortgage loans.

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TRID Exceptions

TRID does not apply to Reverse Mortgages, HELOCs, Chattel-dwelling loans, or lenders that are not considered creditors.

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TRID and RESPA/TILA

TRID integrates mortgage disclosures formerly outlined separately under RESPA (Reg X) and TILA (Reg Z) now covered under TILA(Reg Z).

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Affiliated Business Disclosure

A document required by RESPA when lenders have partnerships with other settlement service providers. It names the affiliates and the services they provide.

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Initial Escrow Account Statement

A document issued at closing, detailing the initial balance and how taxes and insurance premiums are handled in an escrow account for the borrower.

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Loan Estimate (LE)

A TRID form that integrates and replaces the GFE and the initial TIL, providing a good faith estimate of credit costs and transaction terms.

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Closing Disclosure (CD)

A TRID form, similar to LE, but that provides a final, accurate display of costs and loan terms at closing. It details information not available at the LE stage.

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Annual Escrow Account Statement

An annual report issued by the servicer, providing an updated account of receipts and disbursements for the escrow account during that year.

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TRID

Abbreviation for the Truth in Lending Act and Real Estate Settlement Procedures Act integrated disclosure rules.

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Appraisal Requirements

Lenders must provide borrowers with a free copy of the appraisal report for certain loans, promptly after it's completed or at least three days before closing.

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Waiver of 3-Day Appraisal Provision

Borrowers can waive the requirement to receive the appraisal three days before closing for most loans, but not for higher-priced mortgages.

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Annual Percentage Rate (APR)

The annual cost of borrowing, including fees, expressed as a percentage, in a loan.

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Total Interest Percentage (TIP)

The total interest paid over the life of a loan, compared to the loan amount.

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Loan Consummation

The point when the borrower legally obligates themselves to the lender.

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Business Day (LE)

A day the lender's office is open to handle substantially all business functions.

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Business Day (CD)

All calendar days other than Sundays and legal holidays.

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Intent to Proceed

A consumer's formal agreement to move forward with the loan transaction.

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Changed Circumstance

An event outside any party's control or unexpected event specific to the transaction or consumer, that causes changes in required disclosures.

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Application

The point at which the lender has the essential borrower information (name, income, SSN, address, loan amount).

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Seven-Day Waiting Period

The time the borrower has after receiving a Loan Estimate to consider and close the transaction.

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Loan Estimate Delivery Time

Must be delivered or mailed within three business days of application to borrower

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Loan application information

Required information for loan application includes the borrower's name, monthly income, social security number, property address, and loan amount.

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Required Loan Estimate Content

Good faith estimate of credit costs, transaction terms, and more.

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Loan Costs

Expenses associated with obtaining a loan, including lender charges and third-party fees.

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Origination Charges

Fees paid directly to the lender for processing the loan application.

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Third-Party Charges (Shoppable)

Costs incurred for services from companies like appraisers, title companies, or credit reporting agencies, where the borrower can choose providers.

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Third-Party Charges (Non-Shoppable)

Fees paid to specific service providers selected by the lender, where the borrower has limited choice.

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Prepaids

Payments made in advance for services like homeowners insurance, mortgage insurance, prepaid interest, or property taxes.

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Escrow

An account held by the lender to collect and pay recurring expenses like property taxes and insurance.

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Lender Credits

Reductions in closing costs provided by the lender, often as incentives.

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Cash to Close

The estimated amount of money the borrower needs at closing, taking into account all costs and adjustments.

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Good Faith Estimate (GFE)

A document that has been replaced by the Loan Estimate, providing initial estimates of loan costs.

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Tolerance

The allowable percentage difference between the disclosed amounts in the Loan Estimate and the actual charges at closing.

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Zero Tolerance

Certain charges that cannot be changed from the Loan Estimate, unless there's a change of circumstances.

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Change of Circumstances

Events that justify changes in the Loan Estimate, such as a borrower's credit change or a delayed construction project.

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Settlement Services

Third-party services required for a mortgage transaction, such as title insurance, appraisal, and closing.

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Settlement Service Providers List

A document provided by the lender listing approved service providers for each service.

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Revised LE Impact

When a revised Loan Estimate (LE) is issued due to a change of circumstances, only the charges or fees directly impacted by the change are allowed to be modified. This doesn't give the lender the opportunity to change other unrelated charges.

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Revised LE Timing

A revised Loan Estimate (LE) must be issued at least four business days before the loan consummation (closing).

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Tolerance Cures

If a tolerance violation occurs on the Loan Estimate (LE) and there's no valid change in circumstances, lenders can fix it by providing a refund to the consumer, reducing the loan principal, or applying lender credits.

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Closing Disclosure Timing

Lenders must provide the Closing Disclosure (CD) no later than three business days before the loan consummation (closing).

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CD Timeline

The borrower is considered to have received the Closing Disclosure (CD) on the day provided if delivered in person. If mailed or delivered electronically, it is considered received three business days afterward.

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CD Waiting Period Waiver

The borrower can modify or waive the three-day waiting period after receiving the Closing Disclosure (CD) if they have a genuine financial emergency that will be resolved by closing the loan sooner.

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CD Changes Before Closing

If the actual terms or costs of the transaction change before closing, the lender must provide a corrected Closing Disclosure (CD) before consummation.

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CD Correction Timeline

A revised Closing Disclosure (CD) should be issued within three business days of the lender becoming aware of the need for a correction.

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Revised CD Waiting Period

If a corrected Closing Disclosure (CD) results in a change to the APR, loan product, or addition of a prepayment penalty, a new three-day waiting period prior to consummation is needed.

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CD After Closing

In some cases, lenders are required to give corrected Closing Disclosures (CDs) after closing if inaccuracies are discovered.

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CD Page 1

The first page of the Closing Disclosure (CD) summarizes general information about the loan, including terms, closing costs, and the amount of cash the borrower needs to close.

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CD Page 2

The second page of the Closing Disclosure (CD) breaks down closing costs in detail, similar to the Loan Estimate (LE), with columns to show amounts paid by the seller and others.

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CD Page 3

Page three of the Closing Disclosure (CD) provides final accounting for fees, including a section showing any changes from the Loan Estimate (LE).

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CD Page 4

Page four of the Closing Disclosure (CD) outlines the loan terms, identifies the property securing the loan, and describes the escrow account (if applicable).

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CD Page 5

The final page of the Closing Disclosure (CD) includes loan calculations like total payments, finance charge, and APR, contact information, and other disclosures similar to the LE.

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Study Notes

TRID (TILA-RESPA Integrated Disclosure) Rule

  • Replaced dual RESPA (Reg X) and TILA (Reg Z) disclosure requirements with integrated Loan Estimate (LE) and Closing Disclosure (CD) forms.
  • Effective October 3, 2015.
  • Lenders are fully responsible for the accuracy of both the LE and CD.
  • Applies to most federally-related mortgage loans secured by real property or cooperative units.
  • Excludes HELOCs, reverse mortgages, chattel-dwelling loans, and loans by non-creditors.
  • Some exceptions for low-income borrower assistance and certain types of TILA-subject but non-RESPA loans (construction, vacant land, or large acreage loans, and some credit extended to trusts).

Loan Estimate (LE)

  • Replaces Good Faith Estimate (GFE) and initial Truth-in-Lending disclosure.
  • Required delivery within three business days of application receipt.
  • LE must contain good faith estimates of costs and terms.
    • Key aspects include: General Loan information, detailed breakdown of costs, cash-to-close estimate, APR and TIP, comparisons, and additional information (appraisal needs, assumption possibilities, future refinancing implications).
  • Lender is responsible for errors in the LE.

Closing Disclosure (CD)

  • Replaces final Truth-in-Lending disclosure and HUD-1 settlement statement.
  • Required delivery no later than three business days before consummation.
  • Contains final transaction terms and costs.
  • Reflects actual amounts where possible.
  • Must be updated for any substantial changes.
  • Lenders are responsible for accuracy, but may estimate aspects when necessary.

Key Terminology

  • Annual Percentage Rate (APR): Annualized cost of borrowing including fees.
  • Total Interest Percentage (TIP): Total interest paid over the loan life divided by the loan amount.
  • Loan Consummation: The point when a borrower becomes legally obligated; determined by state law.
  • Business Day (LE): Days when lender offices are open for most business activities.
  • Business Day (CD): All calendar days except Sundays and legal holidays
  • Intent to Proceed: Borrower’s declaration of intent to move forward with the loan. Documentation is required.
  • Changed Circumstances: Specific events (e.g., changes in creditworthiness) permitting revised disclosures or resetting tolerance limits.

Tolerance Categories

  • Some variations between disclosed and actual costs are allowed.
  • Zero Tolerance Applies to certain lender charges, rates, or fees which must match estimates.
  • 10% Tolerance Allows for up to a 10% variance from disclosed estimates with changed circumstances.
  • No Tolerance Applies to certain costs like prepaid interest and escrow amounts.

Additional Disclosures and Requirements

  • Settlement/Service Providers List: Lenders must provide a list of settlement service providers if shopping is allowed.
  • Affiliated Business Disclosure: When lender affiliations exist.
  • Free Appraisal Copies: Lenders must promptly provide copies of appraisals, often within three days of report completion (but may be waived) - Especially for high-value loans.
  • "Your Home Loan Toolkit": Explains TRID disclosures and the home-buying process.

Key Differences Between LE and CD

  • CD is the definitive, final disclosure
  • LE provides estimates, and is subject to revision.
  • The structures and content are similar.
  • Key content differences (seller-side vs refinances)
  • CD provides final amounts, including seller or third-party payments and includes summaries for transactions accounting for categories similar to LE format

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Description

Dive into the TRID (TILA-RESPA Integrated Disclosure) Rule and understand its impact on loan disclosures. This quiz covers key elements like the Loan Estimate (LE) and Closing Disclosure (CD), their requirements, and exclusions. Test your knowledge on mortgage loan regulations effective since October 2015.

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