Starting on August 1, 2015 the process for closing a real estate sale with a loan will dramatically change!
The Consumer Financial Protection Bureau is making these new regulations so the borrower has forms that are easier to read and understand, provide more transparency in the loan process, and to give the consumers a chance to react to any last-minute changes to the loan they are seeking. Now that’s good news!
1) The new laws apply to both conforming and jumbo loans
2) All loan applications received by the lender after Aug. 1, 2015 are subject to the new TILA_RESPA Integrated Disclosure Rule (TRID)
3) The TRID will replace the Good Faith Estimate and the Truth-In-Lending disclosure with a new “Loan Estimate” (LE)
So, what does this all mean to buyers and sellers?
1) Well, the LE must be given to the buyer within 3 days of filling out the loan application and the LE must be extremely accurate. If there is a variance in some of the fees and taxes, the lender may be required to refund the buyer all or a portion of those fees. Note that there are categories where the costs may exceed the estimate without limitation such as prepaid interest, property insurance premiums, impound amounts. These type of fees however should be estimated in good faith and based upon the best information reasonably available.
2) Also, a Closing Disclosure (CD) must be given to the buyer 3 days prior to close of escrow. This waiting and review period can NOT be waived. This means if you are trying to hurry and close on your home and you don’t have the CD then you will have to wait. There are some modifications to the timeline but for instance if you make a change to your loan after you received your CD then you have to wait an additional 3 days. Bottom line…If a new CD is issued just prior to close of escrow, it will delay the close!
As a realtor, I have been highly encouraged to write purchase contracts to show that close of escrow will be 45 days from acceptance. Many of us are use to 30 day escrows. But with all the kinks that have to be worked through on the lending end, all buyers and sellers need to know is that there could be longer escrows and delays at the end.
More will be discussed on this topic in the weeks ahead…