Before You Sign Those Closing Docs…
January 28, 2015
Can’t Make it to Closing?
October 15, 2015

A NEW ERA FOR CLOSINGS
CRISTINA M. ORTIZ, ESQ.
September 2015

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was signed into law on July 21, 2010 and created the Consumer Financial Projection Bureau (CFPB). The goal was to make it easier for consumers to shop and understand their mortgages and have protection from any risks and surprise costs at closing.

Currently, the TILA and RESPA forms exist under two different Federal regulations and their information overlaps and is inconsistent, which can be confusing for borrowers and inefficient for lenders. Further, often the buyer does not see or review the mortgage or closing documents until the day before or of the closing.

The new procedures will be implemented October 3, 2015 (recently changed from an August 1 implementation date). During the first few months of the new procedures, the most valuable tool we can all have is Patience!

With this article I hope to help the consumer understand the new closing procedures so they know what to expect.  Here is a breakdown of the new Integrated Mortgage Disclosure.

WHAT: The new Closing Disclosure required by the rule (Dodd-Frank) combines information from the existing Truth-in-Lending disclosure and the HUD-1 Settlement Statement.

WHEN: Change will be effective for transactions where lender takes a loan application on or after October 3, 2015.

WHY: Pursuant to the Dodd-Frank Act of 2010, with the goal of providing consumers with more transparency.

HOW: The Consumer Financial Protection Bureau issued a new regulation that among other things creates 2 new forms and requires a new 3 day business day delivery requirement. A Loan Estimate will replace the current Good Faith Estimate and early TIL disclosure, while a Closing Disclosure will replace the HUD-1 and final TIL disclosure. The Loan Estimate will be issued by Lender or Mortgage Broker and the  Closing Disclosure –will be issued by the Lender or Settlement Agent.

WHAT DOES THIS MEAN FOR HOMEBUYERS?: The Loan Estimate replaces The Good Faith Estimate (GFE) and The Truth in Lending Disclosure Statement (TIL), and should help consumers understand the mortgage’s costs and risks. The Closing Disclosure (CD) replaces the Closing Truth in Lending (TIL)/Housing and Urban Development-1 (HUD-1), and will provide disclosures that help consumers understand all of the transaction costs.

ENFORECMENT/PENALITIES: The Consumer Financial Protection Bureau will issue fines between $5,000 and $1,000,000 per day, to any person who violates law/rule imposed by the Bureau

IMPACT: CLOSING DELAYS. The top reasons given as to why closing delays will occur include:

  1. 3-Day Delivery Rule Changes at the closing table (last minute changes that require a new 3 day waiting period such as changes to the APR above 1/8 of a percent for most loans and changes to the loan product addition of a prepayment penalty to the loan.
  2. Walk-through issues
  3. Issues with small lender/credit union ability to be ready for implementation.
  4. Lack of Communication between Realtor, Lender, Title Agent, etc.

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