Beginning August 1st, 2015, there will be major changes to the closing process thanks to the Consumer Financial Protection Bureau (CFPB).
The changes will include a new Closing Statement, Loan Estimate, and an extended timeline for closings. These new forms and timeline are designed to protect borrowers and improve consumers’ understanding of mortgages and mortgage disclosures, to make it easier to compare loans, and to prevent surprises at the closing table. Applicants for a mortgage loan that submit an application after August 1st will be governed by the new procedures, applicants who applied before but close after August 1st will be governed by the current rules.
The Loan Estimate replaced the initial Truth in Lending Disclosure and Good Faith Estimate. The Loan Estimate will be provided within 3 business days of loan application and provides a summary of key loan terms and estimates of loan and closing costs. The Closing Disclosure replaces the final Truth in Lending Disclosure and HUD-1 Closing Statement. It is given to borrowers at least 3 business days prior to closing and provides a detailed accounting of the transaction. For the Closing Disclosure, business days mean all calendar days except Sunday and legal public holidays.
Plan for a longer closing process.
Industry experts are recommending that 15 days are added to the contract duration for transactions under the new rules. In our Greater Austin market, that means a 45 day Contract-to-Close timeline instead of the now standard 30 day contract. The National Association of Realtors is also recommending that all details be finalized a week before closing. Because of redisclosure rules, some changes to the contract within the last week before closing could delay the closing timeline. Plan to be patient, this is a substantial change for the mortgage, real estate, and title insurance industries and there are bound to be hiccups in the beginning.
The best news for consumers is that this legislation should help avoid surprises at the closing table. You should have final amounts for funds due well before you get to the title company and be able to arrange the funds transfer easily. Your Real Estate Professional and your lender should have plenty of time to review the Closing Disclosure before you sign and avoid any errors.
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