Introduction
The TILA-RESPA Integrated Disclosure (TRID) rule, also known as the Know Before You Owe rule, is a regulation implemented by the Consumer Financial Protection Bureau (CFPB) in 2015. It aims to simplify and streamline the mortgage loan disclosure process, ensuring that borrowers have a clear understanding of the terms and costs associated with their mortgage loans. While the TRID rule applies to most mortgage loans, there are certain exemptions that borrowers should be aware of.
Exemptions under the TRID Rule
Reverse Mortgages: The TRID rule does not apply to reverse mortgages. Reverse mortgages are loans available to homeowners aged 62 or older, allowing them to convert a portion of their home equity into cash. These loans have unique features and requirements, and as such, they are exempt from the TRID rule.
Home Equity Lines of Credit (HELOCs): HELOCs are revolving lines of credit that homeowners can use at their discretion. They are often used for home improvements, debt consolidation, or other financial needs. The TRID rule does not apply to HELOCs, as they are considered open-end credit rather than closed-end credit, which is the focus of the TRID rule.
Loans secured by vacant land: If a mortgage loan is solely secured by vacant land, it is exempt from the TRID rule. This exemption applies when the loan is not intended for the construction of a dwelling or when the borrower does not intend to construct a dwelling on the land within two years.
Loans made by individuals: The TRID rule applies to loans made by creditors who are considered “creditors” under the Truth in Lending Act (TILA). However, loans made by individuals who are not considered creditors in the regular course of business are exempt from the TRID rule. For example, if an individual lends money to a family member or a friend without regularly engaging in the business of lending, the TRID rule does not apply.
Business purpose loans: The TRID rule is primarily focused on consumer transactions. Therefore, loans made for business purposes are generally exempt from the TRID rule. However, it is important to note that the definition of “business purpose” can vary, and borrowers should consult with legal or financial professionals to determine if their loan falls under this exemption.
Conclusion
In summary, the TRID rule applies to most mortgage loans, ensuring that borrowers receive clear and transparent disclosures regarding the terms and costs associated with their loans. However, there are several exemptions under the TRID rule, including reverse mortgages, HELOCs, loans secured by vacant land, loans made by individuals who are not regular creditors, and loans made for business purposes. It is crucial for borrowers to understand these exemptions and seek professional advice if they have any doubts about the applicability of the TRID rule to their specific loan.
References
– Consumer Financial Protection Bureau: www.consumerfinance.gov
– Truth in Lending Act: www.law.cornell.edu
