Home Buying Selling Impact by CFPB Changes

The Consumer Financial Protection Bureau (CFPB) implements a new closing process required for all new home mortgage borrowers effective August 1st, 2015.  CFPB’s new  initiative  “Know Before You Owe” campaign, is to help borrowers understand concisely details related to their new mortgage loan initiations. The newly revised simplified disclosures are more transparent to understand. The new process will be known as the Tila-Respa Integrated Disclosure (TRID).   The new TRID process eliminates the traditional HUD-1 settlement statement, the Good Faith Estimate (GFE), and the Truth in Lending Act disclosure (TILA).  The three will be replaced by the Loan Estimate  (LE) received after applying for a mortgage and  Closing Disclosure (CD) received by all parties involved in the real estate transaction prior to close of escrow as two forms designed to work and compliment information clarity and detail to new Home Borrowers more efficiently.

Loan Estimate:  The LE identifies all costs associated with the home borrowers loan.  The LE is issued by the borrowers lender on or before the 3rd day following the completion of loan application.  The LE is a clearer concise consumer transparency disclosure provided to borrowers to convey understanding in key mortgage lending features, costs and show any and all risks of the loan.  The LE will replace the Good Faith Estimate (GFE) and will dismiss the Truth in Lending disclosure. The borrower must return the  “Intend to Proceed” document back to their lender within 10 days of receipt of the LE.

Closing Disclosure: The CD issued to Home Buyer three days prior to signing at escrow/title discloses all costs associated with the real estate transaction.  Close of escrow is not able to take place on or before this three-day period begins. This benefits a home borrower (buyer) by providing them additional time to compare the final terms and costs found in the LE allowing Home Borrower to verify, process and prepare to sign at the closing table with their escrow/title officers. The lenders are responsible for communicating and notifying all parties involved in the real estate transaction, the borrowers receipt of CD.  Now that the CD is to provided to borrower within the three-day period, lenders will most likely need to have loan docs to title no later than the third day prior to close of escrow (probably best if before).  In the event any of the following occur;  pre-payment penalty, loan product change (i.e. fixed rate to variable rate), or the Annual Percentage Rate (APR) increases by than 1/8% on a fixed rate or 1/4% on a variable rate, these events could delay a closing and a new CD would need  re-issued.

The LE and CD collaboratively display figures already provided, otherwise changes or discrepancies may result in close of escrow delay. The Combined Closing Statement (CCS) replaces the HUD-1 and/or Settlement Statement and now will be the document providing final figures, net proceeds, cash to bring to the closing table and prorate amounts broken down between home buyers and home sellers.

As the new TRID process begins, it’s important for all parties to allow for the possible extension for close of escrow. Close of escrow extensions may be necessary to ensure all parties in the sale of your home are compliant with the newly CFPB’s new TRID policy and procedures.

For Home Borrowers:  The new TRID process benefits Home Borrowers by way of; interest rate, monthly payments and total closing costs will now be displayed on the very first page of the CD, consolidation of several forms and statutory disclosure requirements reduced to one form, the costs of taxes, insurance and how interest rates later down the road impact changes in your payment structure, disclose pre-payment penalty fees or how increases may impact the mortgage loan balance even in the event a home mortgage borrower pays consistently on time, and  reveal cost estimates charges assessed during the escrow process required to close on a mortgage. I.e. appraisals, termite inspections, standard home inspection etc.

For Home Sellers:  It’s very common for  Home Sellers to strategically plan to close on their new property immediately following the sale of their former home. As Home Seller’s are often times patiently awaiting to close on an existing home, before they can close on their next new home. Next day closes are quite common as Home Seller’s are planning to use those existing proceeds to close on another home (sometimes a contingency may be involved).  So if the Home Buyer of your former home is a finance purchaser, allow yourself in your plan some buffer room in the event a possible delay occurs during the initial TRID procedures begins to take place.

We strive to create a smooth stream-lined real estate process with attention to service to create the most enjoyable real estate experience possible for our Home Buyers and Home Sellers.  We believe in educating and proactively addressing possibilities head on, as we depend on every important party’s role to make a real estate transaction a success. This client value towards our real estate bespoke marketing services, is only possible from years of experience. Working with an experienced Realtor® professional, a proven mortgage lending professional as well as a highly accountable trained escrow officers who are prepared to carry out the CFPB procedure, will be crucial in the next coming weeks.  For questions call (602) 451-6600.

Compare the existing with the new forms, visit Consumer Financial Protection Bureaus: http://www.consumerfinance.gov/knowbeforeyouowe/compare/