The mortgage process can be daunting, with its myriad regulations and requirements. Among these, the TILA-RESPA Integrated Disclosure (TRID) Rule, implemented by the Consumer Financial Protection Bureau (CFPB) in 2015, stands out for its impact on disclosure timing requirements for mortgage lenders. Similar to the fee tolerance requirements discussed in Part 1 of this series, it is crucial for lenders to understand and adhere to the timing requirements under the TRID Rule to maintain compliance and provide borrowers with a transparent and smooth mortgage experience. In this blog post, we'll delve into the timing requirements of the TRID Rule, including delivery methods, business days, certain exceptions, as well as offer recommendations for lenders to streamline their workflows, thereby avoiding disclosure timing issues.

Overview

The goal of the TRID Rule was to simplify mortgage disclosures and enhance consumer understanding by consolidating the loan terms into more consumer-friendly formats. It integrated the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), requiring lenders to provide borrowers with specific disclosures at various stages of the mortgage process. By receiving disclosures well in advance (Loan Estimate) and having a waiting period before closing (Closing Disclosure), the TRID Rule aimed to give borrowers more time to compare offers, ask questions, and make informed choices about their mortgage.

Timing Requirements

Central to TRID compliance are the timing requirements for three key disclosure types:

1. Loan Estimate (LE): Lenders must provide borrowers with a Loan Estimate within three business days of receiving a mortgage application. This disclosure outlines the loan terms, estimated closing costs, and other pertinent information, empowering borrowers to compare loan offers effectively.
2. Closing Disclosure (CD): The Closing Disclosure must be provided to borrowers at least three business days before closing. This document summarizes the final loan terms, closing costs, and details of the mortgage transaction. The three-day waiting period allows borrowers to review the terms and ensure they align with expectations before committing to the loan.
3. Revised Loan Estimate or Closing Disclosure: If certain changes occur during the mortgage process, lenders may need to issue a revised Loan Estimate or Closing Disclosure. However, changes triggering a new waiting period vary in significance, with some requiring an additional three-day waiting period and others not.

Delivery Methods and the Mailbox Rule

Fortunately, the TRID Rule offers lenders some flexibility regarding how these disclosures are delivered. Here is how the timing requirements apply according to each method:

• Physical Delivery: The three-day clock starts ticking on the date the lender has evidence or can attest that the borrower has received the disclosures.
• Electronic Delivery: For lenders using e-signatures, the borrower's acknowledgement of the disclosures serves as the starting point for the three-day window.
• Mail Delivery: For disclosures delivered via traditional mail, the "mailbox rule" applies. The borrower is considered to have received the disclosures three business days after the disclosures are delivered or placed in the mail. 

Business Days

To ensure compliance with the timing requirements under the TRID Rule, it is important to note that the Rule employs two distinct interpretations of “business day” to ensure clear timelines for disclosure delivery. Understanding and adhering to the appropriate “business day” definition are of paramount importance for accurate TRID compliance. The two definitions are as follows:

1. Standard Definition (General): The standard “business day” definition is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions.  This definition means the day count may vary from one lender to the next.  It also means the day count can change from year to year within a given lender as they expand or contract the observed holidays and other company events. 
2. Specific Definition: The specific definition does not vary from one lender to the next. It includes all calendar days except Sundays and legal public holidays as specified under 5 U.S.C. 6103(a).  This list seldom changes, but it did so recently with the introduction of the Juneteenth holiday in 2021.

Exceptions 

The TRID Rule does allow for some of the timing requirements to be waived or modified by the borrower if they determine that they need the credit to meet a  bona fide personal financial emergency.  While the CFPB does not clearly define a list of conditions that must be met, they do require that the borrower provides a written statement detailing the set of circumstances that necessitated closing the loan prior to the waiting period. Instances such as going on vacation or attending out-of-town work meetings likely would not qualify as a bona fide personal emergency, but a waiver to avoid a foreclosure deadline would likely meet the criteria. 

Additional TRID Timing Requirements of Note:

• Written List of Service Providers: The companion disclosure to the Loan Estimate where it shows the service providers quoted on the Loan Estimate for the services the borrower is permitted to shop for. This separate disclosure is required to be issued within three business days of the application. If new services are introduced in the middle of the loan cycle, lenders may revise the written list of service providers accordingly. 
• Intent to Proceed: While an intent to proceed does not have to be provided in writing, it does need to be documented prior to the lender imposing any fees onto the borrower. In addition, the intent to proceed cannot be given by the borrower prior to receiving the Loan Estimate. 

Recommendations for Lenders

To ensure compliance with the timing requirements under the TRID Rule and mitigate disclosure timing issues, lenders can implement the following strategies:

• Robust Communication Channels: Establish clear communication channels between loan officers, processors, and borrowers to facilitate timely exchange of information and document submission. Regularly, at least annually, compare the company observed holidays for the new year and make the appropriate changes to systems that are used to track timing. It’s also a good time to double-check that the public holidays have not changed.
• Streamlined Workflow Processes: Implement efficient workflow processes to expedite the generation and delivery of Loan Estimates and Closing Disclosures. Utilize technology and automation tools to reduce manual errors and delays.
• Proactive Monitoring and Alerts: Implement systems to monitor key milestones in the mortgage process and alert stakeholders of impending deadlines for disclosure delivery. This proactive approach helps prevent last-minute delays and ensures compliance with TRID timelines.
• Compliance Training and Education: Invest in ongoing training and education for staff to stay abreast of regulatory updates and best practices in TRID compliance. A well-informed team is better equipped to navigate disclosure timing requirements effectively.
• Regular Compliance Audits: Conduct regular compliance audits to identify any potential gaps or issues in disclosure timing practices. Addressing these proactively helps maintain regulatory compliance and enhances the overall borrower experience.

Conclusion

The consequences of violating TRID's timing requirements can be significant. Inaccuracies or missed deadlines can lead to rescission rights for borrowers, allowing them to back out of the loan even after signing the final documents. Additionally, lenders may face penalties from regulatory agencies if they are not in compliance with the Rule.

By understanding the TRID Rule's timing requirements and implementing these steps, lenders can ensure a smoother and more compliant mortgage process for everyone involved. This approach not only protects lenders from potential violations, but also fosters trust and transparency with borrowers throughout the loan journey. By implementing streamlined workflows, leveraging technology, and prioritizing communication and education, lenders can minimize disclosure timing issues and provide borrowers with a seamless and compliant mortgage experience. 

For further guidance, consult the CFPB’s resources on the TRID Rule, including the TRID Rule FAQs. 

Did You Know?

RegCheck®, Asurity’s automated mortgage compliance solution, allows lenders to detect TRID timing issues in real time, saving lenders valuable time and money. Testing requirements in RegCheck are highly customizable, allowing lenders to quickly identify those issues that matter the most according to their business practices. If you have any questions regarding the TRID functionality in RegCheck, please contact Franci Webster at fwebster@asurity.com. 

Jonas Hoerler is Chief Regulatory Counsel for RegCheck at Asurity. Jonas has worked in mortgage regulatory compliance for nearly 20 years, acting as staff attorney and later as senior regulatory counsel prior to joining the RegCheck team. In his current role, Jonas manages the legal and compliance requirements of RegCheck and oversees all aspects regarding legislative review and product implementation.