New Disclosure Forms, Created by the Consumer Financial Protection Bureau, Required on All Mortgages Starting in October
Beginning Oct. 3, most mortgage transactions will be required to be completed on new disclosure forms created by the Consumer Financial Protection Bureau. The new forms – the Loan Estimate and Closing Disclosure – have been designed to improve consumer understanding of the mortgage process sooner, assist consumers with comparison shopping, and prevent unexpected issues at the time of closing.
According to Chris Polychron, President of the National Association of Realtors, “These new regulatory issues are extremely complicated and play a big role in the real estate transaction. Consumers taking out a loan to buy a home should be ensured they aren't set up to fail.”
When asked how Realtors and consumers can best prepare for new disclosure requirements, Richard Cordray, the Director for the Consumer Financial Protection Bureau, said, “The Bureau's new mortgage rules are smart for the industry and are designed to educate and empower consumers to know before they owe.” He then stressed the importance of preserving reliability in the mortgage market and ensuring that consumers have the knowledge upfront they need when buying a home, which he labeled as likely one of the biggest financial decisions they'll make in their lives.
Mindful of the industry's concerns about delivering both forms within three business days, the Bureau listened, and has limited the possibility of closing delays to three instances:
Changes in the annual percentage rate of a mortgage loan of more than one-eighth of a percentage for a fixed-rate loans or more than one-fourth of a percent for variable-rate loans.
The addition of prepayment penalty.
Change in the mortgage product, such as moving from a fixed-rate mortgage to an adjustable-rate mortgage.
Director Cordray concluded, “These forms represent a major undertaking for lenders, settlement agencies, vendors, and Realtors®. We continue to receive input and are listening closely to any additional concerns as we move closer to the implementation date."
The main goal is to have Realtors, lenders, and their clients work together to make sure the home buying and selling process goes smoothly.
According to Nick Serrano, Vice President of Mortgage Lending for Greater Nevada Mortgage, “What both consumers and those in the housing industry must realize is that the way we close mortgage transactions is changing. As we work through this transition, it will be important for parties to a home loan transaction to be patient and understanding while the new rule is implemented. If you have received a mortgage in the past, understand and accept it will be a bit different the next time around.”
Consumers should feel confident that these new disclosure forms and procedures are being set into place to protect the consumer, and to improve consumer understanding of the mortgage process sooner, aid in comparison shopping, and help prevent unexpected issues at the time of closing.
If you have any questions or need additional information, please visit the Consumer Financial Protection Bureau at www.ConsumerFinance.gov or 855.411.2372, or contact the Sierra Nevada Association of Realtor as www.SNAR.org or 775.885.7200.
The Sierra Nevada Association of REALTORS® is a professional organization supporting Realtors® in the Sierra Nevada region, including the counties of Carson, Douglas, Churchill and Lyon (except for Fernley). Committed to building better communities throughout the region, the Association provides members with expert guidance and professional tools enabling them to deliver superior service to residents and newcomers; and to participate in the political process to protect the industry and private property rights.
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