Legislators Focus on Housing
In the years since the housing crisis, lawmakers have placed a great amount of focus on the housing industry, introducing and revising legislation aimed at protecting current and future homeowners as well as taxpayers.
Legislators in Congress and the Consumer Financial Protection Bureau (CFPB) have turned out heaps of bills, programs, and rules for the industry— aimed at protecting consumers from predatory lending, protecting taxpayers from future bailouts, and simplifying the mortgage process so consumers fully understand their obligations.
CFPB Revises Mortgage Loan Closing Rules
The industry has been in a constant state of flux, attempting to adapt to and prepare for changing rules. One change, set to take place in August is the CFPB’s new TILA-RESPA Integrated Disclosure Rule.
The CFPB introduced the TILA-RESPA Integrated Disclosure Rule to combine the previously separate and inconsistent rules set forth in the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA). The new rule goes into effect August 1.
The previous forms were “overlapping and the language is inconsistent,” according to the CFPB. “Consumers often find the forms confusing, and lenders and settlement agents find the forms burdensome to provide and explain.”
A Brief Look at TILA-RESPA Integrated Disclosure
The CFPB’s Loan Estimate and Closing Disclosure forms will replace the Good Faith Estimate and HUD-1 forms. However, according to the National Association of Realtors (NAR), “Changes to the closing process, not the forms, are generating the most concern for NAR members.”
The biggest change to the closing process is the new requirement that consumers must receive closing disclosure forms three days prior to loan consummation, and they must receive a loan estimate prior to the closing disclosure. Last-minute changes to such factors as the interest rate or loan product require another three days before the loan can close.
Additionally, some types of changes require approval from a loan officer, who may not be present at the closing table.
What the Changes Mean for You
The new closing disclosure rules pose particular concerns for closing attorneys, but the impacts of the rules will likely reverberate through the market. While the new rules are a “major concern,” for closing attorneys, they will also likely have an “indirect” impact on real estate agents, says Todd Yovino, broker and owner of Island Advantage Realty in Hauppauge, New York.
“Closing attorneys are very fearful of that right now,” Yovino says.
In some states, agents, clients, and closing attorneys gather at the closing table and often tweak the loan the day of closing. The three-day rule, therefore, could lead to delays and frustrations for these parties.
“I think it’s going to be a bottleneck,” Yovino says, explaining that home purchases are “very complex in our market to begin with.”
“It’s a little scary, to be honest,” he says.
While typical closing times vary from state to state, NAR is advising agents to prepare for an additional 15 days in closing.
Still, other agents seem less concerned with the new rules. Jim Hastings, owner and president of Hastings Brokerage, Ltd., in Las Vegas, says, “There are new timelines that we will have to wait out,” but the new disclosure rules are not a major concern for him right now.
Hastings finds local legislative matters are more impactful for him right now. He suggests other REO agents keep an eye on local issues and “get involved in their local governments when the need arises.”
How to Prepare
To prepare for the new closing rules, agents and brokers should familiarize themselves with the new forms available on the CFPB website. Take part in industry training, or review the videos, sample forms and timeline available on the CFPB website.
Also, be sure to advise all clients of the lengthened closing timeline. Give yourself and your clients a 15-day cushion.