WHAT IS REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)?
RESPA seeks to reduce unnecessarily high settlement costs by requiring disclosures to homebuyers and sellers and by prohibiting abusive practices in the real estate settlement process. RESPA was signed into law in December 1974 and became effective on June 20, 1975. The law has gone through a few changes and amendments since then, all with the intent of informing consumers of their settlement costs and prohibiting kickbacks that can increase the cost of obtaining a mortgage.
WHAT IS TRID?
“TRID” is an acronym that refers to the TILA (Truth In Lending Act) RESPA Integrated Disclosure rule. This rule is also known as the “Know Before You Owe” mortgage disclosure rule and is part of the Consumer Financial Protection Bureau’s (CFPB) Know Before You Owe mortgage initiative.
WHAT IS THE DIFFERENCE BETWEEN RESPA & TRID?
RESPA governs the settlement process, while TRID, implemented in 2015, is designed to make sure all mortgage lenders’ disclosures are clear, correct, and easy for buyers to understand. TRID, the new mortgage standard mandated by the Consumer Financial Protection Bureau, combines RESPA and TILA requirements.
TRID guidelines specify what information mortgage lenders need to provide to borrowers and when they must provide it. Under TRID rules, a mortgage lender must provide the borrower with the loan estimate within three days of completing a loan application and must provide the closing disclosure three days prior to closing on the property.
TRID rules also regulate what fees lenders can charge and how these fees can change as the mortgage matures.
WHAT IS THE MAILBOX RULE FOR TRID?
The Know Before You Owe mortgage disclosure rule allows in-person delivery and establishes a presumption that a consumer has received a disclosure three business days after that disclosure was delivered or placed in the mail. This is a longstanding rule often referred to as the “mailbox rule.”
CAN THE 3 DAY CLOSING DISCLOSURE BE WAIVED?
A consumer may modify or waive the right to the three-day waiting period only after receiving the disclosures required by § 1026.32 and only if the circumstances meet the criteria for establishing a bona fide personal financial emergency under § 1026.23(e).
WHY IS THERE A THREE-DAY WAITING REQUIREMENT AFTER THE CLOSING DISCLOSURE HAS BEEN RECEIVED?
The purpose of the three-day waiting period after receipt of the Closing Disclosure is to provide sufficient time for the buyer to review the document and to identify and address any issues uncovered.