I received an email today from one of my lending partners detailing the pending changes in the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) disclosure requirements.
Just to refresh your memory, RESPA is "the act designed to protect potential homeowners and enable them to become more intelligent consumers. It requires lenders to provide greater amounts of information to borrowers at certain points in the loan settlement process". TILA is "the federal law designed to promote the informed use of consumer credit by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed."
The new rule, which takes affect on August 1, 2015 consolidates four existing documents into two new ones. These four documents are:
- Good Faith Estimate (GFE)
- Preliminary Truth in Lending disclosure (TIL)
- Final TIL
The GFE and preliminary TIL will become the Loan Estimate and the HUD-1 and final TIL will combine to become the Closing Disclosure. These disclosures will not apply to home equity lines of credit (HELOC's), reverse mortgages or mortgages secured by a mobile home or dwelling not attached to real property.
The link below connects you with a video that further explains how these four documents will be combined and what it means to the loan process: https://vimeo.com/128928951.
Hopefully, these changes will help simplify the paperwork and clarify for the consumer the many confusing aspects of applying for and obtaining a mortgage.