Question

• Explain TILA-RESPA INTEGRATED DISCLOSURE (TRID), its purpose, and what transactions are covered and not covered.
• Explain the prorating process.
• Think about why TRID is necessary and relate any instances where you might have become aware of violations. If you haven't been involved, you may comment on the issues raised by others including myself in the conference.

Answer 1

In the Year 2013, Nov 20, Consumer Financial Protection Bureau(CFPB) came up with the final rule to integrate Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures and regulations, part of Know Before You Owe (KBYO) Mortgage Initiative.The integrated TRID regulation started on Oct 3, 2015 finally.In 2016, July 29, CFPB again released some amendment proposal for TRID regulation citing consumer and industry issues.

TRID Purposes:

It's main purpose is to provide consumers disclosures which enable them to shop for and compare different loan products and settlement cost options as fast as possible.

This rule is designed to help borrowers or mortgage buyers to know the terms and conditions of their home financing transaction.

Transactions covered in TRID:
Closed-end consumer credit transaction secured by real estate property, including following below:
Purchase, Refinance, Construction-Only, Vacant Land and
Loans secured by 25 acres or more.

Investment property transactions when the purpose is consumer related.

Bridge loans for the purchase of a primary residence.

Transactions not covered by TRID:

Home equity lines of credit, reverse mortgage, chattel loans and loans made by non-creditor(defined by Reg Z) lender

Prorating process:

This comes from the term "pro rata". This means proportionally.To describe the real estate expense division based on proportion of ownership or rental.

Let assume one home got sold on April 10, now seller owned the house for 100 days and buyer would own the house for remaining 265 days in that year.

So, in deciding the ownership, the seller's portion of ownership for the year of selling will be 100/365 or 27%.

The buyer's proportion in this case will be remaining 73% i.e 255/365.

TRID is necessary as:

As per the compliance of mortgage property transaction. It is very important for consumer credit transaction.

TRID violation:

The report conducted by Moody’s shows that most of the noncompliance issues found within the loans were only minute technical errors, but the high % of them are actually noncompliance issues or TRID violations. Those reveal that mortgage lenders may be finding it hard to implement effective process to comply with the CFPB’s new regulations in reality.