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New Mortgage Rules Take Effect October 3

New federal mortgage disclosure rules take effect October 3rd. Any residential transaction involving a mortgage will now require the use of new disclosure forms created by the U.S. Consumer Financial Protection Bureau (CFPB). The Dodd-Frank Reform Act and Consumer Protection Act directed the CFPB to combine certain federal mortgage disclosures that consumers receive when taking out a mortgage.

The changes will merge the HUD-1 Settlement Statement, the Good Faith Estimate and the Truth-in-Lending disclosure form into two new closing forms: a Loan Estimate and a Closing Disclosure.

The Loan Estimate form is due to consumers three business days after they apply for a loan, while the Closing Disclosure form is due three business days prior to closing. The Loan Estimate details the transaction, including the estimated loan and closing costs. A lender cannot charge a fee (except for a credit report) until after a consumer has received a Loan Estimate from a lender and has decided to proceed with the loan. The consumer has 10 business days to decide whether to proceed with the loan. The Closing Disclosure form, which details the final transaction, is provided to consumers at least three business days before closing. This allows consumers to confirm they are getting what they expected, consider the loan and ensure there are no surprises at closing. The final Closing Disclosure form must detail the exact costs you will pay for the mortgage, including any alterations made at the closing table.

Borrowers may face delays if there are any last minute changes with the financing of their loan, such as switching their loan type from an adjustable rate mortgage to a fixed rate mortgage or a conventional to a VA mortgage. Changes will require a new Closing Disclosure form and will require a new three-day waiting period.

“REALTORS® and lenders have been preparing for the implementation of these new mortgage disclosure rules for many months,” said Stefanie Pratt, president of the Champaign County Association of REALTORS®. “Our Association has been providing training to members to ensure they are aware of the specific details outlined in the law, including how the new requirements would affect the closing process and how to communicate these changes to consumers. While there could be a bit of a learning curve in the beginning, mortgage lenders and title companies are well prepared for the implementation of these new changes.”

The Consumer Financial Protection Bureau launched a “Know Before You Owe” public campaign earlier this year, including online tools to empower consumers with information they need to know about the new closing process rules at Consumers can download the CFPB Your Home Loan Toolkit. CFPB online tools include a guide to the new mortgage closing forms, a closing factsheet, a disclosure timeline and educational videos to assist consumers. Mortgages have different terms and features, such as loan terms, loan type and interest rate. Consumers need to consider all these features in the purchase of a home which includes shopping around for a mortgage. According to CFPB, the new forms will make it easier to understand complicated mortgage terms and the Loan Estimate makes it easier to shop around and compare loan offers from multiple lenders.

“It's important than ever that consumers work with professionals including a REALTOR® knowledgeable about resources available and local lenders prepared to secure a loan under the CFPB's rules,” said Pratt. “These new forms will make it easier for consumers to understand the mortgage process, aid in comparison shopping and help prevent any surprises at the closing table.”

The Champaign County Association of REALTORS® is a voluntary trade organization serving the Champaign County and surrounding areas and is the leading resource for REALTOR® members and an advocate for home ownership and private property rights.

Friday, October 2, 2015/Categories: News Releases