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Big Changes Are Coming

Beginning August 1, major changes are coming to mortgages. Any real estate transaction involving a mortgage will use new disclosure forms created by the Consumer Financial Protection Bureau (CFPB). This new disclosures will change the timing requirements for disclosures that lenders make to consumers. What does this mean to you? The strong possibility that your closing may be delayed.

If you have taken out a mortgage in the past, you probably were able to close on your purchase within 30 to 45 days. Because of the new requirements beginning August 1, closings will take a minimum of 45 days and may take as long as 90 days or more. Through the Dodd-Frank Act, Congress has ordered the creation of a new form called a TRID. This form contains many intricate requirements for how and when disclosures are made to the consumer. Because of this new timing requirement, a missed date or a change in any of the financial components of the transaction can trigger a delay.

A new loan estimate document that will replace the Good Faith Estimate and the initial Truth in Lending Disclosure must be given to a consumer within 3 days of submitting a loan application.. The final loan estimate must be given 7 days prior to the closing. The customer has 10 days then to decide whether to proceed with the transaction. A Closing Disclosure must be given to the consumer 3 days prior to the closing. This disclosure will include all costs related to the transaction. Any changes made after initial receipt will require a new 3 day waiting period.

What do all these dates and numbers really mean? Basically, any change in the initial estimate of fees and costs will trigger a new waiting period. If you have ever bought or sold a home, you probably know that sometimes costs change all the way up to and including at the closing table. In the past, if at the final walk through a problem is discovered, it could hopefully be worked out at the closing table, the closing statement adjusted and the closing continued. That will not be the case after August 1st. If there is a problem at the final walk through after August 1, the closing will be delayed. The Closing Disclosure will have to be re-done and a new 3 day waiting period will begin. This will be true of any cost change at any time after the initial disclosures are given. If there is a problem with the appraisal value, if a home inspection turns up issues that require money to be spent, if an attorney fee is not turned in to the title company in time, or a hundred other things that happen regularly with real estate closings, the closing will de delayed. This could conceivably cause multiple delays if there are several changes in fees and costs.

The requirements of this new disclosure rule are still being finalized and are subject to change until August 1. There are a number of groups lobbying for a delay in implementing these requirements and they may or may not be successful. If this does in fact take effect on August 1, there will be a big adjustment period while everyone figures out how to work under the new requirements.

If you are buying or selling a home this year, it might be a good idea to try and get it done before August 1st. After that time, we will be dealing with a whole new set of rules and a lot of unknowns. If you arenít able to buy or sell by August 1, you will need to be patient. There will be a huge learning curve for lenders, Realtors, appraisers, inspectors, attorneys and consumers. Expect delays, a lot of questions and probably a lot of frustration. This new disclosure rule will change the way we do business. When and if it becomes law, donít say you werenít warned. If you would like to avoid the uncertainty, call you Realtor and buy or sell now!

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