Just when we think that we have everything down pat, we find out that things are about to change. \u00a0So, here we go again. \u00a0On August 1, the way that most residential mortgage loans are closed across the country will drastically change. A new rule from the new consumer protection agency created by Congress after the financial crisis, the Consumer Financial Protection Bureau (“CFPB”), will take affect on that day.<\/p>\n
Because of this Rule, there will be changes to the Loan Application Process, Changes to Closings, and to the Disclosures. \u00a0Some of those changes that will affect the purchaser are:<\/p>\n
1) Your actual rate, payment, and cost could be higher. You will be given a Loan Estimate within 3 business days\u00a0of applying for a loan. The Loan Estimate will provide you with\u00a0more accurate closing estimates.<\/p>\n
2) The new Closing Disclosure will replace the HUD-1 or Settlement Statement that you sign at closing. The lender will be responsible for more of the information, therefore, they will need to be able to communicate with the real estate agent and brokers, title companies, attorney closers, settlement agents, and escrow agents much more frequently and earlier in the process.<\/p>\n
3) The new Closing Disclosure must be received by the consumer at least three business days before closing. Gone are the days of a client receiving the HUD-1 at the closing table. This change is meant to give consumers an opportunity to review their final numbers before closing in an unpressured environment. \u00a0This could result in many closings being delayed, so that lenders can obtain the required information and send the Closing Disclosure a week prior to closing.<\/p>\n
4) Goodbye 30-Day Contracts. Lenders will more than likely need more time to ensure compliance with the Rule, and meet all their disclosure requirements before closing. \u00a0Therefore, beginning on August 1, to avoid delays in the scheduled closing date that could have serious consequences for clients, it would be prudent to consider writing contracts with no less than 60 days to close.<\/p>\n