TRID Trepidation

TRID is an acronym for the new combined TILA-RESPA Integrated Disclosure forms to be used for consumer real estate closings whose loan applications are received after October 3, 2015. It should be no surprise to anyone that there has been a major revision to the consumer disclosures. Since they first came into use in 1974, there have been almost annual modifications, additions or clarifications to the HUD-1, RESPA and TILA disclosures. These accumulated changes have made the forms almost unreadable and certainly unintelligible to consumers.

Responsibility for these disclosures has been transferred from the United States Department of Housing and Urban Development (HUD) to the relatively new Consumer Finance Protection Bureau (CFBP). During May 9, 2012, hearings before the House Financial Services Committee of Congress considering the mandate given to CFPB to simplify the disclosures, Representative Francisco Canseco of Texas expressed this support. He told the committee that one of his constituents was a banker from El Paso, Texas. That’s banker’s prior employment had been as commander of the U.S. Army tactical nuclear artillery division. That banker told Rep. Canseco there was less paperwork required to fire a nuclear artillery device than was then required to originate and document a single family mortgage. So too is the prevailing belief that consumers had become overwhelmed by the sheer volume of paper thrust upon them at a closing.

Until now attempts to improve consumer disclosures had primarily resulted in additions to the existing forms or the reorder of information using jargon only a lawyer could love. The current solution, replacing old forms with TRID, should make a real difference. The CFPB has actually managed to change and “uncomplicate” the disclosures through the TRID forms which replace the traditional Truth in Lending, Good Faith Estimate and the HUD-1 Settlement Statement. Based upon recent experience in dealing with the CFPB, it is surprising that the changes are for the better. Redundant or confusing entries are gone and replaced with a more easily understood presentation of financing and closing costs.

However, not all the CFPB’s changes will be welcome. Anyone familiar with the current closing process knows that many changes occur leading up to and at the closing table. For example, the final walk-through must happen in close proximity to actual closing so the buyer can be certain that no damage has been done immediately prior to transfer of possession. Any discovered damage is usually dealt with by way of a credit at closing. Under the TRID system no changes can be made within three days of closing because consumers must have the final closing disclosures three business days prior to closing. These TRID disclosures are not an estimate, but the actual final disclosures. If there are any changes the closing must be postponed until brand new disclosures have been given at least three additional business days before the rescheduled closing. Under this new system a last minute closing credit required because of an adverse finding during a walk-through will be impermissible unless done three business days prior to closing or “off the books.” Real estate practitioners, lenders and lawyers alike, will need to make adjustments.

Because these new rules are administered by the CFPB, any violation could result in draconian penalties. The CFPB is emphasizing that all professionals dealing with a consumer must adhere to the new rules. These include an absolute prohibition against the improper use or disclosure of the consumer’s personal information. A “knowing” violation of the CFPB rules could result in a million dollar a day penalty.

Change is inevitable. The change to TRID should, at worst, require only a modification of current procedures, not a transformation of practices.

You can reach Ray Ostler at rostler@gsgolaw.com.