For those of you preparing to buy a house or refinance an existing one, you get to be pioneers. Or guinea pigs. Really both.
You see, new federal regulations have taken effect that change the way home loans are handled after October 1. Before mortgage lenders had to provide a good faith estimate of closing costs but, once the closing process was largely handled by title companies. They prepared the settlement statement (often called the HUD-1) reflecting the financial aspects of the deal. While they had to follow basic instructions of the lender regarding releasing the loan funds to the seller, they were independent players.
The new federal regulations make the lender responsible for the closing disclosure, the new term for the settlement statement. They require that the closing disclosure be consistent with the estimates given at the beginning of the loan and require that the closing disclosure be provided to the borrower at least 3 days before the closing. If certain changes are made to it, the borrower has to be given additional time to review it.
The effect of these changes will likely be to stretch what had been a roughly 30 day period from loan application to closing out to 45 days. Because the changes are new, lenders, title companies, and real estate agents will be feeling their way through and working out kinks for the next several months. Mistakes will be made, some of which may threaten to kill deals. It would not be unusual for the Consumer Financial Protection Bureau to make adjustments to these regulations after they see how the new rules are working. It will be important to allow this longer time in purchase and sale agreements and to exercise patience in working one’s way from purchase and sale agreement to closing. If you need help in working through the maze, contact us.