Last-Minute Closing Changes to Get Difficult
On Aug. 1, real estate and industry professionals should be prepared that last-minute changes three days before closing will become much more challenging to make. The Consumer Financial Protection Bureau is combining mortgage forms and disclosure documents that will be required to be given to clients much earlier, which means any changes after the fact could quickly derail a closing date.
One major change coming on Aug. 1 is that the HUD-1 Settlement Statement is being replaced by the “Closing Disclosure” or “CD,” which basically will summarize the terms and charges of the loan. Lenders will be required to deliver the CD to consumers three days prior to closing.
If any changes are needed on the CD during that three-day period, the customers’ closing likely will be delayed.
“Some may point to the ‘bona fide emergency’ exception and feel this is a way around the three-day rule,” notes Ken Trepata, director of Real Estate Services for the National Association of REALTORS®, in a recent column. “However, the bona fide emergency must be a serious emergency – not losing a locked-in interest rate, for example, but rather, more like one will be bankrupt if the deal does not close. And it will have to be put in writing in one’s own words, not a form letter. Even then, it will have to be approved by the lender, and given the way loans are actually made and closed, the ultimate lender will likely not be present at the closing; so this approval [and approval of any other changes for that matter] will not be quick, if it comes at all.”
As of Aug. 1, the CFPB also will be combining two common forms used in lending — the Good Faith Estimates and Truth in Lending disclosures. The two forms will be combined into a single form known as the “Loan Estimate” or “LE” form. Lenders will be required to give borrower applicants this form within three days if they’ve collected at least six pieces of information on customers, such as their name, income, estimated value of property, loan amount, and more. Lenders will be held accountable to the exact charges listed on this form, and the loan charges listed must come within 10 percent of the actual costs.
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