Back on October 3, 2015 the United States government implemented a new rule that is known as the “know before you owe rule” otherwise known by it’s acronym TRID which means TILA/RESPA Integrated Disclosure Rule. When you break it down further TILA stands for “Truth In Lending Act” and RESPA stands for “Real Estate Settlement Procedures Act”
The government was concerned that the current procedures used in lending and mortgages were too convoluted and confusing for consumers. This all came from the carnage of the financial crisis a few years back when the world economy nearly collapsed because of the questionable practices of the big banks. As we all know thousands of people lost their homes because they could not afford to pay the mortgage, or they simply saw no point in paying for something that was no longer worth what they owed.
Of course the big culprit in all of this was the big banks that were found to be too big to fail and were propped up by the government. However, consumers were not without fault either. Just because the bank was willing to give you more money than you could afford to pay on a monthly basis, didn’t mean that you should have taken it. This TRID rule attempts to simplify the borrowing process so that it is easier for consumers to understand the fees they are paying and the responsibilities they are taking on with the loan or mortgage.
In the most simple terms, the rule requires that lenders provide the borrower with a disclosure statement that tells them their cost of borrowing, how much the fees will be, and how much their payments will be. The borrower has 3 business days to read and understand the disclosure statement. No fees can be charged by the lender at this stage. Once the borrower understands their obligations in the disclosure, they can sign a form that says they wish to proceed. Once they do that, the lender can now charge fees and close the transaction and the borrower will get their money.
I believe that the government did a great thing with TRID but if you are shopping for a mortgage in the United States, make sure you use a lender that does a lot of volume. If you use a small lender that hasn’t quite gotten up to speed on TRID, you could see delays in getting your mortgage closed.
Watch this interview to get more details