Over the years, regulations for the mortgage and loan industry have increased due to less than honest and fair practices by some lenders. Some of these regulations have spurred the evolution of mortgage documents to the ones that are now being utilized today. Compliance is imperative for the lenders, agents, and attorneys involved in the real estate closing process to ensure that consumers are being treated fairly and for these businesses to avoid enforcement actions being taken upon them. Understanding the role of the CFPB, what TRID encompasses, and the newer Loan Estimate and Closing Disclosure forms is a step towards making sure your closings are compliant.
CFPB & TRID
The Consumer Finance Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure (TRID) regulations caused many changes in the real estate closing industry. The changes are intended to make the real estate purchase and lending processes more transparent for borrowers and to streamline the process for borrowers, lenders, and settlement agents by eliminating duplicate forms and certain data requirements.
One of the biggest and most confusing changes under TRID was the use of two new forms, the Loan Estimate (LE) and the Closing Disclosure Form (CDF). These forms replaced old forms and combined the overlapping data requirements of four previous Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) forms.
By reducing the data requirements down into two forms, lenders can now reduce repetitive data entry, make it easier for borrowers to locate key information, and save time during the real estate closing process.
The Loan Estimate and the Closing Disclosure Form
The two newer forms don’t require any new information; they simply consolidate information that was already being collected from four forms down to two.
The Loan Estimate provides borrowers with disclosures and information regarding their mortgage. The data covers loan costs and transaction terms that should help borrowers better understand the key components, costs, and risks of the loan. This form replaces the previous RESPA GFE (Good Faith Estimate) and the initial TILA disclosure for most residential real estate transactions.
The Closing Disclosure Form is used in transactions that require use of the new Loan Estimate form. The CDF is the final disclosure provided to borrowers. It reflects the true costs of the closing, rather than just the estimated costs that are provided by the Loan Estimate much earlier in the lending process. The CDF replaces the existing HUD-1 and the final TILA disclosure forms.
These newer Loan Estimate and Closing Disclosure Forms will be used for most consumer mortgages, but not all. In most cases, lenders and real estate settlement agents will be using the old HUD form and the new LE and CDF documents, depending on the type of real estate transaction being processed.
When to Use the Old HUD Forms
Use the current HUD forms required by TILA and RESPA in the following situations:
- Home equity revolving lines of credit
- Reverse mortgages
- Mortgages secured by a mobile home
- No-interest second mortgages
When to Use the Newer Loan Estimate and CDF
Lenders and real estate settlement agents will use the newer LE and CDF documents for:
- Most closed-end consumer mortgages
- Construction-only loans
- Loans secured by vacant land or by 25 or more acres
Timing Requirements
Using the correct forms isn’t the only change settlement agents now need to worry about. There are also strict new timing requirements to follow.
The LE must be provided to borrowers or placed in the mail no later than the third business day after the loan application has been received.
The CDF must be provided to borrowers no later than three days before the closing of their loan.
Software Can Help You Meet Form and Timing Requirements
Although the newer process and timing requirements add more details and tasks to keep track of in order to maintain compliance, there are tools like closing software that can make these requirements much easier. Easysoft’s closing settlement software is the all-in-one software solution that real estate transaction attorneys and their staff need to ensure compliance with TRID. Easysoft has designed the software to walk real estate settlement attorneys through the closing process, saving time up to 70%, avoiding errors, and streamlining the process with automatic data population of the correct forms.
Easysoft’s Real Estate Software includes:
- Automated CDF (MISMO and TRID Compliant)
- Automated HUD-1 and HUD-1A
- 1099-S electronic submissions
- Interactive Ledger
- Plus many other features and integrations
Easysoft Real Estate Software provides access to your closing files from any device, anywhere you have an internet connection. No software to download, not updates to install, and you can be up and running in moments because the design and automation really makes closings EASY! Tech Support by our US-based team is included and there are no hidden or additional fees.
Schedule your demo today and qualify for a FREE 7-day trial so you can see for yourself why Easysoft has been the recommended software of real estate attorneys for over 35 years.
