2018 Amendment to TRID: Finally Closing the “Black Hole”
An amendment to TRID (“TILA-RESPA Integrated Disclosure”) has become effective as of June 1, 2018, and mortgage lenders can breathe a sigh of relief with the welcomed change.
The 2015 TRID Rule requires lenders to provide borrowers with a Loan Estimate within three business days of receiving the loan application. The Loan Estimate is a good faith estimate of closing costs as well as the loan terms. The closing fees disclosed to the borrower on the Loan Estimate fall into three different categories.
- “Zero Tolerance Fees” must not exceed the amount the borrower actually pays at closing, for example, mortgage tax and recording fees are Zero Tolerance Fees.
- “10% Tolerance Fees” must not exceed the sum of the estimates by more then 10%, many title fees fall under this category.
- “Changeable Fees” may change as long as they were based on the best information reasonably available to the lender at the time of disclosure, fees to third parties may fall under this category.
Under TRID, lenders must provide borrowers with credits or refunds when the above tolerances are exceeded costing lenders extreme amounts of money each year.
If a lender learns of a change in closing fees, the lender must issue a revised Loan Estimate to the borrower within three business days of learning the change, and at least four days prior to closing. If a final Closing Disclosure has already been provided to the borrower, a revised Loan Estimate may not be sent and the Lender is now responsible for the under disclosure. The time period where a lender may not re-disclose a fee to a borrower has been labeled the Black Hole.
Under the 2018 amendment to TRID, when lenders learn that a fee has changed they will now be permitted to re-disclose the fee to the borrower prior to the closing of the transaction in three different ways. The first way is by issuing a revised Loan Estimate, if they learn of the changed fee six or more business days before closing and they have not already issued the Closing Disclosure. The second way is by issuing the Closing Disclosure, if they learn of the changed fee less than six business days before closing and they have not already issued the Closing Disclosure. The third way is by issuing a revised Closing Disclosure, if they learn of the Changed fee less than six business day before closing and they have already issued the Closing Disclosure. In each way, the lenders are required to issue the revised disclosures within three business days after learning of the changed fee.
This amendment is warmly welcomed by both lenders and borrowers. Lenders will no longer be responsible to refund borrowers for changed fees simply because they were not made aware of the change within the TRID required timeframes and borrowers will not be at risk of lenders increasing their closing fees to absorb the refunds lenders have had to payout.