Congress has directed the Consumer Financial Protection Bureau to simplify the home loan process. Until last week the consumer would receive four documents relative to their loan transaction. There are now two.
The forms are easier on the eyes.
The new Rule requires the Lender to issue two documents.
1. The Loan estimate must be provided within three business days of
applying for a loan. This replaces the Good Faith estimate which
was required to provided with the days.
2. The Closing Disclosure will replace the HUD Statement.
This document must be sent to the borrower within three days
business day before the closing. For the purpose of this document
Saturday will be a business day.
It is the lender who will be required to send this document.
The document can be delivered by hand, mail, certified mail or
The Facts are the consumer has been required to receive this document 3 days
before the closing since 2009. So lenders and closing attorneys who have not
been doing it will now be required to do something that has been a
requirement for more than five years.
There are rumors out there that the closing will need to be delayed if there are issues that arise at the last minute such as an issue with the walk through.
Only THREE Changes require a new 3 day review
1. The APR increases by more than 1/8 percent for a fixed rate
loan or 1/4 percent of an adjustable loan. ( The APR includes the interest rate and lender fees such as points/loan fees in relation to the loan.)
Therefore if the cost of borrowing increases the lender much inform the buyer prior to three business days before the closing.
2. A prepayment is added to the loan.
3. The loan product changes such as a switch from a fixed loan to an adjustable.
NO OTHER CHANGES REQUIRE A NEW 3 DAY REVIEW
I have heard the following:
When conducting the walk-through an issue is discovered such as a missing stove or a scratched floor. The closing will not need to be delayed. A credit can be made to the seller. This does not effect the cost associated with borrowing money.
The amount of the real estate commission has changed or a credit needs to be provided for oil etc..
Again, this does not increase the costs associated with the loan therefore a delay is not required.
The biggest I have heard is that is there are any typo;s found at the closing table there will need to be a 3 day delay. NOT TRUE!!!
There are no reflections in the loan amount so simple typo's do not require a change.
Charlie Burke is the owner of the Massachusetts Academy of Real Estate
and served on the Massachusetts Board of Registration Sub-Committee