What to Know About the New Mortgage Rules

New Mortgage Rules

On October 3, 2015, new rules for mortgages went into effect, and are expected to have a major impact on future real estate transactions.  The TILA-RESPA Integrated Disclosure rule which merged the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-in-Lending disclosure form into two new closing forms, now known as a Loan Estimate and a Closing Disclosure is now in action. Previously, TILA and RESPA had been a source of confusion for many consumers, however, by merging them together, the real estate process will ultimately lead to consumers who are better informed.

 

Real estate agents are now having to reformat their processes in order to comply with the new mortgage rules, potentially causing real estate process to become slower and more timely and complex. Under the new laws, the old familiar closing documents, such as the Good Faith Estimate and HUD-1 forms, and the timelines agents have relied upon for many years are now being retired, meaning agents are now getting acquainted with a new set of forms. The new Loan Estimate and Closing Disclosure forms have stricter requirements, which could mean more delays at closing. Last minute changes to the settlement will also be more difficult, if not impossible, for agents to make, due to the strict timelines of the forms. Any changes needing to be made at the last minute will require lender approval.

The End Goal

While real estate professionals will face some new challenges with these rules, the end goal is to create a more pleasant experience for the consumer. One notable change gives the consumer more time to read and understand the full costs of their mortgage prior to closing.  This is an important adjustment for consumers, as buying a home is a major financial decision. The real estate process often times comes with complex language and laws and therefore it is beneficial for the consumer to have enough time to truly understand what they are signing. The Loan Estimate is now required to be provided to the buyer within three days of the completed application, and the Closing Disclosure is due three days prior to the closed sale.

 

Prior to these new mortgage rules, HUD-1 settlement forms could undergo revision and be delivered up until the day of settlement.  Now, the new mortgage forms must be finalized and given to the borrower three days prior to closing.  If this deadline is not met, the Closing Disclosure must be reissued, and the date of closing will be moved back three days. This ensures consumers are not forced to act before they feel comfortable doing so by giving them additional time to review the information with their agents.

Communication is Key

Getting used to these new rules will be a challenge, however agents all over the nation are finding ways to understand and work with them, and most importantly, to better serve their clients. During this transition period with the new rules, two-way communication will be crucial.

 

In order to keep everything running smoothly during your transaction, the lines of communication between you, your agent and your lender must stay open and be monitored carefully to ensure you are still given top priority. It is the responsibility of your agent to ensure the new rules are being enforced, while causing as little disruption as possible to you and your transaction. Be sure to find an agent who has immersed themselves in these new rules and fully understands the new process.

 

At the end of the day, with educated, savvy agents and informed buyers, the new mortgage rules should ensure all parties are happy and satisfied.

 

 

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