Get ready for some major changes coming to the real estate and mortgage industry on August 1, 2015. That’s when the new TILA-RESPA regulations of the Consumer Financial Protection Bureau (CFPB) will go into effect.
Among the most important changes from the new regulations, there will no longer be Good Faith Estimates or Truth in Lending disclosures. Instead, those two forms have been combined into a single Loan Estimate (LE). With the new LE form, lenders will be held to the exact charges listed for some items and must come within 10 percent on other items. In addition, the HUD-1 Settlement Statement will be replaced by the Closing Disclosure (CD). The CD will include the same items as the LE to allow the borrower to compare the items side-by-side. The CD must be delivered to the borrower at least three days prior to the closing. Any changes to the CD may delay the closing process. Because the lenders will be responsible for the disclosure documents that they produce, lenders will be fairly inflexible about last minute changes to any of these items. Further, given the requirement of delivery of the CD at least three days prior to the closing, all parties to real estate transaction should prepare for longer escrow periods and should endeavor to have all documents completed at least one week in advance of the desired closing date.
Last month, the RE/MAX CEO and co-founder directed a personal letter to the CFPB president requesting a “good faith grace period” for the introduction of the new regulations. In response to multiple similar requests, the CFPB announced last week that a grace period will be in effect for those lenders attempting to comply in good faith with the new regulations. However, the CFPB did not push back the August 1 implementation date of the new regulations. Thus, lenders and services will likely make their best efforts to comply with the new regulations, and consumers will not receive any form of relief from the impact of these new regulations on real estate transactions.
The takeaway for California buyers and sellers is to be prepared for 45 to 60 day escrows with more paperwork and to anticipate more interaction and more coordination between the lender, escrow officer, borrower, and other involved parties.
Esquire Real Estate makes it our business to know what's going on with the most current legal changes in the real estate industry as well as to educate our clients on the best strategy to maximize their profit and legal protection. This is all included in our services. Here are just 7 Reasons why hiring us, an Attorney-Broker in one, will protect your assets, maximize your profitability, and keep your real estate interests protected.
UPDATE: Just after this blog was published, we learned that the CFPB issued a statement that the effective date of these regulations will be moved to October 1. You can view the CFPB statement here.