In an effort to empower consumers to take more control over their economic lives, the CFPB (Consumer Financial Protection Bureau) began implementing something called TRID, an acronym that stands for TILA RESPA Integrated Disclosures (TILA =Truth-In-Lending Act; RESPA=Real Estate Settlement Procedures Act), whereby new disclosures are required to be given to the borrower of a mortgage at least 3 business days prior to closing on a home.
These disclosures were designed to:
- Help the borrower understand what he/she is paying for;
- Allow the borrower to shop lenders should he/she choose to do so;
- Avoid costly surprises at the closing table, by allowing the borrower enough time in advance of the closing to understand and consider his/her options.
The three business days are counted just as a 3-day right of rescission, with business days being every day but Sundays and Federal Holidays.
Certain events that present themselves just prior to closing may cause this clock to reset; for example, changes such as:
- An APR increase or decrease in excess of .125%;
- A loan product change (i.e. an adjustable rate mortgage changed to an interest-only mortgage);
- The addition of a prepayment penalty
Not every event will cause the lender to reset the 3 day closing clock, however, it is important that both buyers and sellers are aware of the new rules under TRID, given that certain last minute changes have the potential to delay a closing.
For more information on the new Loan Estimate and Closing Disclosure forms, contact your chosen mortgage professional.