TILA-RESPA Integrated Disclosure Extended Closings
Real estate closings in the Huntsville, Alabama area as with the rest of the country are expected to take
longer after October, 3 2015. If time is an issue for you then consider making that offer on a new home and going under contract before the October, 3 deadline.
This year, the Consumer Financial Protection Bureau (CFPB) begins requiring banks to provide consumers with a longer window in which to review loan documentation. The new rule, potentially in effect October3, 2015 can push closings by as many as six days-to more than a week - longer than usual. Most lenders and closing attorneys I talk to suggest a 45 day closing time frame to be safe. Buyers needing to close quickly may need to begin negotiations sooner in order to meet a move-in deadline.
On the other hand, the changes could give an advantage to all-cash buyers over those needing conventional financing, since sellers looking to close quickly may choose a faster close over a higher net. In a hot seller's market, cash may be king for the buyer...it usually is.
The Ruling Explained:
Originally slated to roll out August 1, 2015 in October, the federal government will require that loan disclosure documents contain a combination of both the Real Estate Settlement Procedures Act (RESPA) and the Federal Truth in Lending Act (TILA) in a document known as the TILA-RESPA Integrated Disclosure (TRID). The ruling, known a "Know Before You Owe" must accompany the Loan Estimate and include all charges, fees and line items at least three (business) days before closing. In the past, this information was often given to consumers on the day of closing on the HUD-1 form (which no longer will be necessary).
The purpose of the changes is to mitigate the potential for surprises at the closing table and offers an advantage to buyers since any increase of more than one-eighth of a percent during the three-day window--or other changes such as pre-payment penalties, additional fees or other items that increase the consumer's financial responsibility--requires entirely new documentation and another three-day window (delay). Note that a decrease in interest of fees will not cause such a delay.
According to the CFPB the new forms are easier to understand and use. During testing, participants returned more correct answers about their sample mortgage using the new forms as compared to the traditional forms. The new form lists the total loan amount, interest rate, monthly principal and interest and projected payments on the first page of the form. Closing costs and cash required to close appear at the bottom of the easy to read page.
Specifically, the first section on the front of the document clearly indicates if the amount of the loan, interest rate and monthly principal and interest can increase after the closing, and prepayment penalties and balloon payments are plainly indicated.
In the second section, projected payments for the life of the loan, including the years in which increases may occur, gives the buyer the needed information to plan for the future.
The primary advantage for home-buyers is that the three-day window allows them to walk away from a deal without penalty in certain circumstances and allows them to more quickly understand the terms of their mortgage.
A disadvantage for those needing to close quickly is that bankers, mortgage lenders, escrow officers and other real estate professionals will need to learn the new documentation and set up computer software and other systems to prepare it. I think all involved should expect delays or a few glitches in the beginning, but once we get used to these changes - and we will - things should once again run smoothly...until the next change!
If you have questions about the new forms and how to understand them, I would be glad to talk with you about them. You may call me or visit my real estate website anytime: MadisonAlabamaHomes.com
Photo courtesy of Fantasista/Freedigitalphotos.net
Content adapted from original post published at….http://nicktpappas.com/?p=3825
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