TRID Guidance for Renovation Loans

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Overview

This job aid provides general guidance to mortgage lenders on the disclosure of common renovation-related costs, fees, and reserves under the TILA-RESPA Integrated Disclosure Rule (TRID), including updates commonly referred to as TRID 2.0. Specifically, it outlines where certain renovation expenses may be disclosed on the Loan Estimate (LE) and Closing Disclosure (CD), and whether those items may be considered APR-related for disclosure purposes.

Renovation loans often involve additional costs not present in traditional mortgage transactions, such as contingency reserves, consultant fees, draw administration fees, inspection fees, and renovation-related permits or plans. Because these items may be disclosed in different sections of the LE and CD depending on the lender’s interpretation, investor requirements, and internal policies, lenders may encounter inconsistencies in how renovation-related fees are disclosed across the industry.

The purpose of this job aid is to provide a practical reference that helps lenders identify common renovation-related costs and understand typical disclosure placement based on guidance historically provided by mortgage compliance professionals. It is intended to support lenders, compliance teams, and operations staff in developing consistent disclosure practices for renovation lending.

LE/CD TRID Guidance for Renovation Loans

1Since there is no Section K on the Loan Estimate (“LE”), when disclosing in Section K, these amounts are factored into the “Funds for Borrower” and “Funds from Borrower” calculations on the standard LE used for purchases under the sub-heading “Calculating Cash to Close.” Likewise, these amounts should be factored into the “Funds for Borrower” and “Funds from Borrower” calculations on the standard Closing Disclosure (“CD”) and disclosed in Section K of the Summaries of Transaction Table. These amounts would, along with the purchase price, be subtracted from the Loan Amount as part of the Closing Costs Financed calculation in the Cash to Close Table of the LE and CD. For refinance transactions, these amounts are factored into the Payoffs and Payments calculation on the alternative LE and CD in the Calculating Cash to Close Table. The fees would also be disclosed in Section K in the Payoffs and Payments table on the alternative CD.

2Disclose in Section C if borrower is given the option to shop and the vendor is listed on the Settlement Providers List (“SPL”). Otherwise, disclose Section B.

3Neither PennyMac nor The Money Source offer any guidance on fee placement. Both of these investors defer to the originating lenders legal and compliance guidance.

Summary

Renovation mortgage transactions introduce additional costs and fees that must be properly disclosed under the TILA-RESPA Integrated Disclosure Rule (TRID). Because renovation lending involves services, inspections, reserves, and administrative functions that do not exist in traditional purchase or refinance transactions, determining the appropriate placement of these items on the Loan Estimate (LE) and Closing Disclosure (CD) can be challenging.

This job aid serves as a reference guide to help lenders identify common renovation-related costs, determine typical disclosure placement, and understand whether those items may be considered APR-related. However, because lender policies, compliance interpretations, and investor requirements may differ, this document should be used as a reference tool rather than a substitute for internal compliance review.

Ultimately, lenders should confirm disclosure practices with their organization’s compliance department and any applicable investors to ensure alignment with regulatory expectations and secondary market requirements.

Legal Disclaimer

This job aid is provided for informational and educational purposes only and is intended to offer general guidance regarding the placement of renovation-related costs, fees, and reserves on the Loan Estimate (LE) and Closing Disclosure (CD) under the TILA-RESPA Integrated Disclosure Rule (TRID), including updates commonly referred to as TRID 2.0.

The information contained in this document is based on industry knowledge and guidance previously provided by mortgage compliance professionals; however, it does not constitute legal, regulatory, or compliance advice. Mortgage lending regulations, agency guidelines, and compliance interpretations are subject to change and may vary based on lender policy, investor requirements, and regulatory interpretation.

In addition, investors may apply their own interpretations or disclosure requirements regarding the placement of renovation-related fees, costs, and reserves. Lenders intending to sell renovation loans to an investor should consult directly with that investor to confirm specific disclosure expectations and requirements prior to originating or disclosing such loans.

Users of this document are solely responsible for verifying all disclosure requirements with their organization’s legal counsel, compliance department, investors, and applicable regulatory authorities before implementing any guidance contained herein.Reliance on this material without independent verification is done at the user’s own risk.

The author and publisher assume no responsibility or liability for errors, omissions, or any outcomes resulting from the use of this information.

This material may not be reproduced, distributed, or used for commercial purposes without prior written permission.