Julie Tache, Realtor®, CRS, ABR, e-PRO,SPS, QSC
Broker/Owner of Homes With Cachet, Elevate Charlotte Sponsor
Julie@JulieTache.com, 704.236.7536 Ask NOW about a special offer for ELEVATE readers!
If you have ever obtained a mortgage to purchase a home, you learned a lot of abbreviations and acronyms along the way to understanding all those real estate documents, right?
This year, some of it is going to change – just a bit later than planned. Originally slated for August, October 3rd is now the date the new TILA-RESPA Integrated Disclosures Rule, or “Know Before You Owe” Mortgage Disclosure Rule takes effect.
Ever hear of Dodd-Frank back in 2010? When the US financial crisis was in full swing, it created the Consumer Financial Protection Bureau, a “21st century” government agency that “helps consumer finance markets work by making rules more effective… empowering consumers to take more control over their economic lives”. You may already be familiar with the ability-to-repay (ATR) rule, which created more stringent guidelines for borrowers looking to secure a home loan, and has made some people feel that the CFPB is protecting them – from themselves.
The CFPB has now made sweeping changes to the documents with which the public, Realtors®, lenders and attorneys are so familiar, once again stating a protection to consumers. Currently, mortgage borrowers receive a Good Faith Estimate (GFE) that lists the expected costs of obtaining their home loan. Since 1974, the HUD-1 Settlement Statement (often referred to at the HUD-1 or HUD) has been the status quo as the document that shows the debits and credits for both buyer and seller at closing.
Beginning October 3rd , when you apply for a mortgage you will receive a “Loan Estimate” within three days of application (in place of the GFE). Then a “Closing Disclosure” will serve as the official settlement statement at closing (replacing the HUD-1). One of the biggest fears for real estate professionals is the fact that the Closing Disclosure must be received by the buyer THREE business days prior to closing. In a world where it is common to receive a HUD-1 the day before or even day of closing, this change will add time to the closing process. Buyers and sellers are often frustrated by closings that don’t occur on the date specified on the contract, but get ready for possibly longer delays!
Another noticeable change is that the seller is virtually absent in these documents created by the CFPB. As a matter of fact, the seller is not the person being “protected” by this paperwork, and they may receive a different version of the Closing Disclosure than the one received by the buyer. Remember, this is all to protect the consumer – and if you are obtaining a federally-backed mortgage to buy a home, you aren’t the “buyer” anymore – you are the “consumer”.
So while mortgage loan officers and real estate closing attorneys have been practicing for months with the new documentation, please don’t be frustrated when your Realtor® requires more time to “consummate” your transaction. After all, it’s for your own “protection”!
For more details on these and other changes, visit CFPB.gov
Download the Homes With Cachet App at the Apple or Google app store!
Please contact Julie if you are considering buying or selling and she will guide you through the CFPB changes.