Mastering the TILA-RESPA Integrated Disclosure (TRID) Rules

What is TRID?

TRID combines disclosure requirements from the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single, integrated disclosure regime. Implemented by the Consumer Financial Protection Bureau (CFPB) in 2015, TRID was designed to make mortgage disclosures more transparent and easier for consumers to understand.

The two primary disclosures under TRID are:

1. The Loan Estimate (LE): Replaces the Good Faith Estimate (GFE) and initial Truth in Lending disclosure
2. The Closing Disclosure (CD): Replaces the HUD-1 Settlement Statement and final Truth in Lending disclosure

Key Requirements and Timelines

Loan Estimate (LE)

• Timing: Must be delivered or placed in the mail no later than the third business day after receiving a loan application
• Application Definition: An application is defined as having six specific elements:
  • Consumer's name
  • Consumer's income
  • Consumer's social security number
  • Property address
  • Estimated property value
  • Loan amount sought
• Fee Restrictions: Lenders can only charge for the credit report before issuing the LE
• Accuracy Requirements: The LE must be made in "good faith," meaning the estimates must be consistent with the best information reasonably available

Closing Disclosure (CD)

• Timing: Must be received by the consumer at least three business days before consummation (closing)
• Delivery Methods:
  • In-person delivery: Considered received when given to the consumer
  • Mail: Considered received three business days after placing in the mail
  • Electronic: Considered received three business days after delivery unless evidence shows actual receipt
• Changes Requiring a New Waiting Period:
  • APR increases by more than 1/8 of a percentage point for fixed-rate loans or 1/4 for adjustable-rate loans
  • Loan product changes (e.g., from fixed to adjustable)
  • Prepayment penalty is added

Tolerance Levels for Fee Changes

TRID establishes three "tolerance" categories for fee changes between the LE and CD:

Zero Tolerance (No increase permitted):

• Fees paid to the lender or mortgage broker
• Fees paid to an affiliate of the lender or broker
• Fees for services the consumer cannot shop for

10% Cumulative Tolerance:

• Fees for services the consumer can shop for but uses a provider on the lender's written list
• Recording fees

No Tolerance Limit (Can increase without restriction):

• Prepaid interest
• Property insurance premiums
• Amounts for escrow accounts
• Fees for services the consumer shopped for using a provider not on the lender's list
• Fees resulting from changed circumstances

Changed Circumstances

Changes in fees beyond the tolerance thresholds are permitted only in specific situations:

• Extraordinary events beyond the control of any party
• Information specific to the consumer or transaction changes
• New information specific to the consumer or transaction emerges
• Consumer-requested changes
• Interest rate dependent charges when the interest rate was not locked
• Expiration of fee quotes (after 10 business days)

Record Retention Requirements

Lenders must retain copies of the LE and CD for:

• Three years for the Loan Estimate
• Five years for the Closing Disclosure

Common NMLS Exam Questions About TRID

When preparing for the NMLS exam, pay special attention to:

1. Timing requirements for both the LE and CD
2. The six elements that constitute a complete application
3. Tolerance categories and which fees fall into each
4. Changed circumstances that permit exceeding tolerances
5. Record retention requirements
6. Proper delivery methods and when disclosures are considered "received"
7. Which changes require a new three-day waiting period

Practical Tips for TRID Compliance

1. Implement clear processes for identifying when an application has been received
2. Track changed circumstances carefully and document thoroughly
3. Maintain a written list of service providers when allowing consumers to shop
4. Set up automated reminders for timing requirements
5. Review fee disclosures meticulously to ensure they fall within appropriate tolerance levels
6. Establish quality control procedures for verifying CD accuracy
7. Train staff regularly on TRID requirements and updates

TRID Exceptions

Be aware of transactions that are exempt from TRID requirements:

• Home Equity Lines of Credit (HELOCs)
• Reverse mortgages
• Mobile home-only loans
• Investment property loans
• No-interest second mortgages for down payment assistance

Conclusion

The TRID rules represent a significant portion of the federal mortgage regulations tested on the NMLS exam. Mastering these rules not only helps you pass your exam but also ensures you can provide compliant, professional service to your clients in the real world.

Remember that TRID regulations continue to evolve through CFPB interpretations and amendments, so staying current with industry updates is essential for any mortgage professional.

Need more help preparing for your NMLS exam? Check out our comprehensive practice tests and study resources specifically designed to help you master complex regulatory topics like TRID!