The TRID Rule has been in effect for
exactly 5 years (October 3, 2015) and the Consumer Financial Protection Bureau
(CFPB) has published an assessment of its effects and effectiveness. The TRID
Rule and its associated disclosures and forms was part of a mandate to CFPB
included in the Dodd-Frank Wall Street Reform and Consumer Protection Act to
combine previously separate mortgage disclosures given to consumers under the
Truth in Lending Act (TILA) and the 1974 Real Estate Settlement Procedures Act
(RESPA). Dodd-Frank also mandates an assessment of the rule within five years
of the effective date.
Before the TRID Rule, Federal law
generally required that consumers applying for mortgages receive two different
forms, one with disclosures regarding the cost of credit (TILA) and another
concerning real estate settlement costs, the Good Faith Estimate (GFE). Shortly
before settlement consumers received two additional forms: the final TILA
disclosure and the RESPA settlement statement (HUD-1).
The TRID Rule mandates an early loan
estimate including that integrates the GFE and the early TILA disclosure as
well as certain Title XIV Disclosures.
The TRID Rule’s Closing Disclosure form integrates the HUD-1 and final
TILA disclosure as well as certain Title XIV Disclosures. The Rule also specifies
the time frame under which the forms and disclosures are provided to the
The goals of the
compliance with the disclosure requirements of TILA and RESPA
- Ensuring that
consumers receive full and accurate information on their mortgages
- Making it easier
for consumers to locate key information
- Allow consumers to
compare the cost of different mortgage offers and the estimate of actual terms
- Aid consumers in
understanding the mortgage and help them decide if they can afford a mortgage
It was also hoped that the rule would enable
consumers to pick the best loans for them, know whether they actually get the
price and terms they expected, allow time for questions and negotiation between
application and settlement, promote more efficient closings, and lower
disclosure forms improved prospective borrowers’ abilities to locate key
mortgage information and improved their abilities to both compare the features
and costs of different mortgage offers and to compare estimated and actual loan
terms and costs.
evidence showed the disclosure forms improved borrowers’ ability to understand
loan estimates and loan transactions.
§ Evidence was mixed regarding
whether the Rule increased consumer shopping for mortgages.
Director Kathleen L. Kraninger said that the Dodd-Frank Act does not
requirement assessments to include a cost-benefit analysis, but she has made it
a priority to include them. However, despite the Bureau’s best efforts it was not
possible to obtain the data necessary to do such an analysis of the TRID Rule.
It does, however, appear to have created sizeable implementation costs for
lenders and closing companies.
assessment included surveys of lenders and closing companies and found the
typical cost for a lender to implement the TRID Rule was $146 per mortgage
originated in 2015, or roughly 2.0 percent of the average cost of originating a
mortgage. Similarly, a typical cost for
a closing company to implement the TRID Rule was $39 per closing in 2015, or
about ten percent of the average cost of closing.
The effects on
ongoing costs is less clear. Industry
data indicate that mortgage lending costs have steadily increased over the past
decade, but there is no data that demonstrates how much, if any, of these
increased costs are attributable to the TRID Rule. This is compounded by the
fact the Bureau implemented other mortgage rules at roughly the same time that
also may have affected costs. Lenders
indicated their largest implementation costs to be new information technology
systems, policies, and training while closing companies said their costs
largely stemmed from efforts to understand the requirements of the Rule and
from new information technology systems, policies, and training.
The TRID Rule
appears to have decreased mortgage originations and increased closing times and
the time it was implemented, butt these measures returned to pre-TRID Rule
levels in a relatively short period of time. Originations of home purchase
mortgages and refinance mortgages dropped notably in the first two months after
the Rule’s effective date (roughly 14 percent and eight percent, respectively) but
recovered quickly. This pattern may be
explained by the increase in typical closing times, which would have pushed
back the origination dates for some mortgages.
A mortgage quality
control software provider reports the share of mortgages with at least one
critical defect, one that would result in the mortgage being uninsurable as
part of a security or ineligible for sale to its intended recipient on the
secondary market, did increase to 1.8 percent during the quarter the rule was
implemented (Q4 2015) from 1.2 percent the prior quarter. However, 1.8 percent
was also the approximate defect rate in Q2 of that year.