I’m sure you are all aware by now that the new Mortgage & Closing Disclosure regulations will take effect on August 1st. Mandated by the Consumer Finance Protection Bureau (CFPB), these changes were put in place to make the home buying/ borrowing process more transparent and understandable for the consumer. I think it’s good for us all in the industry to look at the CFPB’s name and to understand that they are the “consumer protection bureau,” not the real estate or mortgage protection bureau!
In a broad scope, the new home buying process will combine two existing Disclosure Requirements under TILA and RESPA. For mortgage lenders, the Good Faith Estimate and Truth In Lending disclosures will now be one form called the “Loan Estimate.” For Realtors and Escrow Agents, the Final TIL and HUD-1 are being replaced by one form called the “Closing Disclosure.”
But as the Owner of a mortgage company and as a former Realtor, I just have to ask, “what do these changes really mean to me? How will my selling and closing process be affected?”
Changes to the “closing process,” not to the forms, should be of greatest concern for Realtors. Gone are the days of sign today and close tomorrow! The CFPB entitles this new rule the “Know Before You Owe” rule. They feel the consumer should be fully aware of all the terms and conditions of their mortgage loan, and should be given ample time to review their closing documents. This brings us to the part of the new rule which will have the biggest impact on Realtors – UNDER THE RULE, THE BUYERS MUST RECEIVE THE CLOSING DISCLOSURE AT LEAST THREE DAYS BEFORE THE TRANSACTION CLOSES.
Simply put, homebuyers who are using financing to close must be provided all their closing paperwork at least 3 days before your COE. Does this mean that all of your closings are going to take longer? Yes, No, and Maybe? The National Association of Realtors is recommending that you add an additional 15 days to your closing timetable. And they suggest that the closing documents be delivered to the buyers a full 7 days prior to closing… in order to accommodate any changes the buyers/borrowers may make.
My recommendation is that you sit down with your Loan Officer and make sure that their company is fully aware of the new rules and is prepared to meet the new timetables. And this doesn’t mean that 30 days processing time becomes 20, and 20 days becomes 10! This means that you, as the Realtor, and your Lending Partner should agree on what realistic turn times are. Once you agree on what is realistic – then forthright communication to all parties in the transaction… buyer, seller, lender, title…. will be important. As the NAR says, “Keep Communication Tight” and your closings should not be impacted.