A Breakdown of the New CFPB Rules

The new regulations from the Consumer Financial Protection Bureau (CFPB) are geared toward providing the customer with a more transparent transaction. To help achieve this transparency, the agency has proposed seven changes to the real estate process. The changes touch almost every aspect of the real estate transaction, including the process, the length of time involved, paperwork and much more.

Below are proposed seven changes:

  • Loan Estimate Form: This form replaces the separate disclosures, or the Initial TIL (Truth in Lending Act disclosure) and the Good Faith Estimate (GFE), and outlines the mortgage’s key features, cost and risk. The lender must provide this to the buyers no later than three business days after they submit a loan application.
  • Closing Disclosure Form: This form is available in different formats for different transaction types, combines the HUD-1 and the Final TIL, and lists all disclosures to help consumers understand the costs of the transaction. The lender must provide this no less than three business days before the closing.
  • Three-Day Rule: Three is the magic number for the Loan Estimate and Closing Disclosure forms, which need to be provided to the consumer within three days (as described above). This new rule expedites the transaction time and requires all parties involved to work faster to accommodate both three-business-day deadlines.
  • Delivery: Two delivery alternatives are under consideration for the delivery of transaction documents. The loan estimate will be delivered by either the lender or a mortgage broker, and the closing disclosure will be delivered by either the lender or closing agent. No matter the delivery method, the lender will be held responsible for the document’s accuracy and timeliness, security and storage.
  • Limited Closing Costs: To prevent unexpected costs that may be disclosed at closing, regulations now require full disclosure in advance of any circumstance that may lead to additional charges at the closing table. Unless there are exceptions, which the bureau is in the process of defining, charges must not increase for the lender’s own services, affiliate services or any other services for which the consumer was not permitted to shop.
  • All-in APR: A new way to calculate annual percentage rates (APR) will be more inclusive and include costs like title services, closing agent fees, appraisal costs and credit reports. While the APR rates will increase, all the costs are shown upfront, which will better prepare the buyer for costs at closing.
  • Recordkeeping: Lenders will be required to maintain electronic records of Loan Estimate forms for three years after they are supplied to the customer, and Closing Disclosure forms must kept for five years after the closing date.

We’re going to see a lot of change over the next year as the final CFPB rules come out and the industry begins implementation. The changes won’t be without a few growing pains, but in the end, the CFPB hopes to make the industry a more trustworthy place, and we can all agree that will be a benefit.

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