Look Ahead for Lending Changes
Starting August 1st, 2015, the Consumer Finance Protection Bureau’s new TILA-RESPA regulations will take effect. Issues like poor communication and confusing numbers helped bring about these changes that have been in the works since 2012. The new guidelines will help to ensure that consumers know exactly what they are signing when they print on the dotted line.
The TILA-RESPA regulations will consolidate four existing documents into two forms:
A Loan Estimate – this will take the place of the Good Faith Estimate and the initial Truth-in-Lending disclosure. This form will be sent to an applicant by a lender no later than three business days after the submission of a loan application.
A Closing Disclosure – this will take the place of the HUD-1 and the final Truth-in-Lending disclosure. This form will be sent to a buyer from the person handling the closing no later than three business days before closing.
Here are just a few ways in which these new forms will benefit you:
The interest rate, monthly payments, and the total closing costs will be clearly presented on the first page . This will allow consumers to compare the different types of mortgage loans, ultimately helping them choose the one that’s right for them.
Receiving the Closing Disclosure sooner will allow consumers to compare the final terms and costs to those outlined in the estimate. This will allow them to address any questions they may have prior to signing.
Combining the forms clearer language and design will cut back on consumer confusion, as well as reduce the amount of paperwork involved .
To prepare for the August 1st changes, lenders must modify their traditional practices, most likely adding staff and increasing budgets to keep up with the documentation and timelines required to be compliant with the new regulations. Realtors, lenders, and title companies will have to work hand in hand to make sure closings occur on time. It's more important than ever to use experienced and knowledgeable professionals when buying or selling real estate. Please call me if you have any questions. I am always happy to help!