WASHINGTON – Feb. 6, 2015 – On Aug. 1, real estate and industry professionals should be prepared for a timetable change: It will become much more difficult to make last-minute changes within three days of closing. The Consumer Financial Protection Bureau (CFPB) is combining mortgage forms and disclosure documents, and clients will get them earlier. That means any changes done after the fact could quickly derail a closing date.
One major change coming Aug. 1 is that the HUD-1 Settlement Statement will be replaced by the "Closing Disclosure" or "CD," which basically summarizes the terms and charges of the loan.
Lenders must deliver the CD to consumers three days prior to closing. If any changes are needed on the CD during that three-day period, the customers' closing likely will be delayed.
"Some may point to the (new law's) 'bona fide emergency' exception and feel this is a way around the three-day rule," says Ken Trepata, director of Real Estate Services for the National Association of Realtors®, in a recent column. "However, the bona fide emergency must be a serious emergency – not losing a locked-in interest rate, for example, but rather, more like one will be bankrupt if the deal does not close. And it will have to be put in writing in one's own words, not a form letter."
Even if all the steps are in place to get a bona fide emergency approved, Trepata says, it "will have to be approved by the lender. And given the way loans are actually made and closed, the ultimate lender will likely not be present at the closing; so this approval [and approval of any other changes for that matter] will not be quick, if it comes at all."
As of Aug. 1, the CFPB also will combine two common forms used in lending – the Good Faith Estimates and Truth in Lending disclosures. The two forms will be combined into a single form known as the "Loan Estimate" or "LE" form.
Lenders must give borrower applicants this form within three days if they've collected at least six pieces of information on customers, such as their name, income, estimated value of property, loan amount and more. Lenders will also be held accountable to the exact charges listed on this form, and the loan charges listed must come within 10 percent of the actual costs.
Source: "RESPA/TILA Changes Right Around the Corner," RISMedia (Feb. 2, 2015)
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