For many years, securing a mortgage for your dream home was a highstress process involving a lot of paperwork.
It still can be stressful, but now, at least, there’s a lot less paperwork, thanks to a new rule from the Consumer Financial Protection Bureau.
It used to be that under the Real Estate Settlement Procedures and Truth in Lending Acts required multiple forms to be distributed to borrowers at several different time points to inform them of the costs and terms of the mortgage. However, these forms contained overlapping information in inconsistent formats, making it challenging for consumers to comprehend the important details they need to make good financial decisions.
The new rule from the CFPB — called the TILA-RESPA Integrated Disclosure rule, which went into effect Oct. 3— helps remedy the problem by combining four existing disclosure documents into two forms:
a loan estimate, which will have to be delivered within three business days of receiving the borrower’s loan application
a closing disclosure, which the consumer must receive at least three business days before the transaction is completed.
The new TRID rule is one of the most significant changes to the home mortgage industry in decades, streamlining the mortgage system and making it more comprehensive. The loan estimate form allows consumers to comparison shop between loans, while the closing disclosure includes the final transaction.
Along with the TRID rule, the Bureau also released a new set of online tools as part of its Know Before You Owe initiative to help consumers better navigate the mortgage process, including measures to help homebuyers choose the best loan option and prevent costly, last-minute surprises when closing. “Our new mortgage forms reduce the information gap between lenders and consumers, shedding light on a process that often feels like a mystery,” CFPB Director Richard Cordray said in a statement. “It is time consumers have more power in the mortgage process, and our new forms and online tools will help make that a reality.”
Among the CFPB’s new “Owning a Home” tools:
Step-by-step guide to mortgage milestones: The “Owning a Home” website is broken down into four different phases the mortgage process — “Prepare to Shop,” “Explore loan choices,” “Compare loan offers” and “Get ready to close.” Each section includes goals, recommended actions and tips to help consumers with important decisions through the mortgage process.
Mortgage payment worksheet: This tool allows homebuyers to look at their monthly finances, including debts, savings and living expenses, to estimate how much they can afford on a mortgage. Consumers also can use tools to explore loan interest rates to make sure they’re getting the best deal.
Interactive sample of the new TRID forms: The site also features interactive versions of the new loan estimate and closing disclosure forms. This tool provides descriptions and definitions of terms homebuyers might not understand and highlights key areas of concern. It also allows consumers to review their own transactions and make sure all the numbers check out.
In addition to these recently released tools, the Consumer Financial Protection Bureau also offers a “Your Home Loan Toolkit,” a booklet of conversation prompts and worksheets, a housing counselor locator and a guide for real estate professionals to ensure easy and on-time closures.
“Owning a Home” tools and additional information about TRID and mortgage loans can be found at www.consumerfinance. gov.
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