New Closing Disclosures Take Effect

Category: Real Estate Matters Real Estate Matters
Published: 01 October 2015 01 October 2015

Buying a home is exciting, but the process can feel overwhelming at times. Many would be homebuyers are unsure how to get started, how much they can afford, or what to expect when buying and financing a home.

New rules and forms by the Consumer Financial Protection Bureau (CFPB) will be implemented on October 3rd. The implementation of the Truth in Lending Act - Real Estate Settlement and Procedures Act Integrated Disclosure rule (TRID), which the CFPB calls the Know Before You Owe initiative, is expected to bring sweeping changes to the real estate industry. It will merge the existing HUD-1 Settlement Statement, Good Faith Estimate, and Truth-in-Lending disclosure form into two new closing forms: a Loan Estimate and a Closing Disclosure.

The CFPB has unveiled online tools to help consumers navigate the Know Before You Owe initiative. The new online tools are on the CFPB's "Owning a Home" website. "When a consumer shops for a home they can set themselves up for success with a little bit of preparation. They should shop for a great mortgage loan with the same amount of time and diligence that they spend shopping for the right home," Kim Clark, Association Executive for the Silver City Regional Association of Realtors. "The CFPB's 'Owning a Home' website has many great tools for consumers such as tools to explore interest rates, a monthly payment worksheet, a loan estimate explainer, a closing checklist and a guide to closing forms."

The National Association of Realtors and the Consumer Financial Protection Bureau have worked together to inform Realtors, lenders, title companies and consumers about the new closing process. NAR's goal is to ensure the October roll out of the new closing process will promote sales and not hinder them. "While the TRID changes don't directly affect Realtors, Realtors can help to alleviate the impact. Most Realtors are aware of the changes, taking actions, and working with industry partners to smooth the transition," stated Clark.

Since the announcement of the rules many Realtors have expressed concern that the three day review might cause delays to the closing process. The Director of the CFPB has emphasized that the new rules mandate that a lender issue a new Closing Disclosure-and give the borrower three days to review the form-only when the loan product changes, the interest rate increases beyond a prescribed amount, or a pre-payment penalty is added. The changes "will reduce paperwork, remove confusion, and make the process more transparent."

"Buying a home is about preparation! Learn about your mortgage options. A great place to start is at the 'Owning a Home' website - www.consumerfinance.gov/owning-a-home," stated Clark. "Use a Realtor, they are the most trusted resource for real estate information and have unparalleled knowledge of local markets and conditions, and can help further explain the new closing process."

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