BIG CHANGES or NO BIG DEAL? New Rules Start August 1st!

By
Real Estate Agent with CHANE REALTY INC 3230505

 

Get ready!  August 1st will bring some of the biggest changes in decades to the real estate closing process.  Gone will be three forms that have confused consumers for years – the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-In-Lending disclosure form.  They will be replaced by two different forms – a Loan Estimate and a Closing Disclosure.
 
"KNOW BEFORE YOU OWE"
The forms and rules were created by the Consumer Financial Protection Bureau (CFPB), the government agency charged with overseeing the mortgage lending process.  The CFPB has marketed the changes as the “Know Before You Owe” rules. 
 
This is long overdue, as the old forms were out-dated and often confusing. The two new forms will help consolidate the information and make it easier for consumers to compare their final costs to the original estimates.  If any changes occurred, borrowers will be able to see the differences right away.
 
Both new forms can still see some modifications as the CFPB reviews how they are working in real life. 
 
3-DAY WAITING PERIOD
The biggest concern voiced by the real estate industry has been the new 3-day waiting period.  The CFPB will require that the closing disclosures be given to the buyer at least three days prior to closing.  This is a positive change for the borrower, and in fact, lenders have been REQUIRED to provide a 3-day review for changes to APR since 2009.
 
MUCH ADO ABOUT NOTHING
There has been much unnecessary fuss in the industry that any last minute changes will trigger a new 3-day waiting period.  So much misinformation has led the CFPB to prepare a one-page fact sheet detailing three, and ONLY three things that would trigger a new review.  They are, 1) change to the APR, 2) adding a prepayment penalty, and 3) change in loan product such as fixed rate to adjustable rate loan.
 
In my opinion, if a lender makes such a drastic change 3-days prior to closing I want the buyer to have a new review period.  Still, I see how this could happen on very rare occasions.
 
The CFPB further explains that unexpected surprises after a walkthrough, adding a seller credit, changes to payments made at closing such as taxes, escrows, or commissions, and typos found on documents will NOT trigger a new 3-day waiting period. 
 
It is well understood that the real estate industry is accustomed to last minute emergencies and changes.  The CFPB simply wants to make sure that borrowers aren’t burned by hidden changes to their loans.
 
You can check out the CFPB notice regarding the 3-day waiting period here:  CFPB Fact Sheet

Comments (2)

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

I'm doing the training right now on the changes and am not impressed with the way that they are going about the entire process.

I understand that the CFPB is trying to make things clearer to the borrower, but instead they are adding an entire level of complexity where I don't see where the benefit will be...especially when compared to the old "good faith estimate" form that we used for years.

There is no doubt that the borrower should be well informed as to what they are getting into, but even in the "bad old days", the borrower had no less than the application, which outlines the interest rate and total fees expected, the good faith estimate, which outlined the specific fees and costs that the borrower was going to incur, the truth in lending (which admittedly was a confusing document), half a dozen lock/float documents and the HUD-1, which were all signed by the borrower prior to the loan funding.  My point is that if the borrower wasn't informed, it was probably because they weren't paying attention!

Now, that said, Ceasar has spoken and the new way will be the only way and at first, I bet that you will see closing getting put off that otherwise wouldn't have had to be (as time goes on and the powers that be become less afraid of the new way, that should mellow out, but you will never convince me that at first everybody isn't going to be afraid of their own shadow).

 

Thanks for the post...may you be blessed to live in interesting times!

 

Bob

Jun 11, 2015 06:40 AM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Felix - Recently, I attended an informative class about the new rules starting August 1st.

Jun 11, 2015 09:03 AM