GET READY! Saturday, October 3rd is the date set by the Consumer Finance Protection Bureau (CFPB) to institute some of the biggest changes in decades to the real estate lending and closing process. Originally set for August 1st, the CFPB moved the start date to allow lenders and title companies more time to prepare for the changes.
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
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