Estimated study time: 45 minutes
Content:
TRID (TILA-RESPA Integrated Disclosure) is the federal rule that combined the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) disclosures into two standardized forms: the Loan Estimate (LE) and the Closing Disclosure (CD). TRID was implemented by the CFPB (Consumer Financial Protection Bureau) and applies to most closed-end consumer mortgage loans (excluding HELOCs, reverse mortgages, and mobile home loans not attached to land). The purpose of TRID is to help consumers understand the costs of their mortgage loan and compare offers from multiple lenders before committing.
The Loan Estimate (LE) must be provided to the borrower within three business days of loan application and at least seven business days before closing. The LE contains three pages of information: the loan terms and projected payments (principal, interest, taxes, insurance), closing costs organized by service type, and comparisons of total loan costs. Certain charges on the LE are subject to tolerance rules — they cannot increase at closing beyond specified limits. Zero-tolerance items (that cannot increase at all) include origination charges, transfer taxes, and fees for required services the borrower was not permitted to shop for. Ten-percent-tolerance items include title services and recording fees when the borrower is permitted to shop. Items outside the tolerance categories (insurance, prepaids) may change without limit. If a valid changed circumstance occurs (rate change, change in loan program, new information), the lender may issue a revised LE restarting the timing requirements.
The Closing Disclosure (CD) must be provided to the borrower at least three business days before closing. The CD is a five-page document detailing all final loan terms, projected monthly payments, and all closing costs. Any changes to the CD after delivery that involve an increase in the APR above 1/8% for fixed-rate loans (1/4% for adjustable-rate loans), a change in loan product, or the addition of a prepayment penalty require a new CD and a new three-business-day waiting period. Real estate agents must understand TRID timing requirements to avoid scheduling closings that do not allow sufficient time for the mandatory waiting periods.
RESPA (the Real Estate Settlement Procedures Act) continues to apply alongside TRID and prohibits specific practices in federally related mortgage transactions. RESPA Section 8 prohibits kickbacks, fee-splitting, and referral fees between settlement service providers — a real estate agent may not receive a fee for referring a buyer to a specific lender, title company, or attorney. RESPA Section 9 prohibits sellers from requiring buyers to use a specific title insurance company as a condition of sale. Affiliated Business Arrangements (AfBAs) — referrals between companies under common ownership — are permitted only if disclosed, the buyer is free to use other providers, and no kickback is paid. Violations of RESPA can result in civil and criminal penalties and license discipline.
Key Terms:
Quiz Questions:
Q1. A buyer submits a mortgage application on Monday. When must the lender provide the Loan Estimate?
A) The same day the application is received B) Within three business days of receiving the application C) At least seven business days before closing D) At the time of closing, along with the Closing Disclosure
Answer: B — The Loan Estimate must be delivered within three business days of receiving the application. Separately, the LE must be provided at least seven business days before closing — both rules apply.
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Q2. The Closing Disclosure is delivered to the buyer on Tuesday. The buyer wants to close on Wednesday. Is this permitted?
A) Yes — same-day closing is always permitted if the buyer agrees B) No — the CD must be received at least three business days before closing; Wednesday is only one day after Tuesday C) Yes — the three-business-day rule applies only to the Loan Estimate D) No — the CD must be received at least seven business days before closing
Answer: B — The mandatory three-business-day waiting period after CD delivery prevents closing on Wednesday. If the CD was delivered Tuesday, the earliest closing day would be Friday (counting Wednesday, Thursday, Friday as three business days).
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Q3. A real estate agent refers all of her buyer clients to a specific mortgage lender in exchange for $500 per closed loan. Under RESPA Section 8, is this arrangement permissible?
A) Yes — referral fees between professionals are a standard business practice B) No — RESPA Section 8 prohibits kickbacks and referral fees between settlement service providers C) Yes — as long as the buyer is informed of the arrangement D) Yes — if the lender and agent have a written affiliated business arrangement
Answer: B — RESPA Section 8 prohibits kickbacks and referral fees for referring settlement service business. A real estate agent cannot receive a fee for referring clients to a lender, even if disclosed. Affiliated Business Arrangements require common ownership and meeting specific disclosure requirements — a straight referral fee does not qualify.
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Q4. After the Closing Disclosure is delivered, the lender discovers the APR will increase by 0.25% above what was shown in the CD. What must happen?
A) The lender may close without a new disclosure because the change is within tolerance B) A revised Closing Disclosure must be issued and a new three-business-day waiting period must run C) The lender may close immediately because APR changes are not subject to TRID rules D) The change must be approved by CFPB before closing can proceed
Answer: B — An increase in the APR above 1/8% (0.125%) for fixed-rate loans (or 1/4% for ARMs) requires a new Closing Disclosure and a new three-business-day waiting period. A 0.25% increase exceeds the 1/8% threshold and triggers the requirement.
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Q5. A seller insists that buyers must use a specific title insurance company owned by the seller's cousin as a condition of the purchase. Under RESPA, is this permissible?
A) Yes — sellers may negotiate any terms they choose B) No — RESPA Section 9 prohibits sellers from requiring buyers to use a specific title insurance company C) Yes — as long as the title company is licensed in Massachusetts D) No — but only if the buyer can show the title company's rates are above market
Answer: B — RESPA Section 9 explicitly prohibits sellers from conditioning a sale on the buyer's use of a particular title insurance company. Buyers have the right to choose their own title insurance provider.
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