Lender rules and requirements change throughout the years and from lender to lender. Even though some might feel it’s “more work” just to buy a home, it’s only to protect the consumer. Our team has been keeping track of all of these changes so that we can be the best resource for our clients when questions arise. We recently sat down with Capital Title of Texas to go over some of these changes and we want to share with you some of the things we learned.
The Consumer Financial Protection Bureau (CFPB) has issued new rules that will affect most closing transactions that began after October 3, 2015. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was signed into law in 2010; this law established the CFPB. The CFPB works to give consumers the information they need to really understand the terms of their agreements with financial companies. The CFPB also works to make regulations and guidance as clear and streamlined as possible so providers of consumer financial products and services can follow the rules on their own.
Here are some other things the CFPB does:
- Writes rules, supervises companies, and enforces federal consumer financial protection laws
- Restricts unfair, deceptive, or abusive acts or practices
- Takes consumer complaints
- Promotes financial education
- Researches consumer behavior
- Monitors financial markets for new risks to consumers
- Enforces laws that outlaw discrimination and other unfair treatment in consumer finance
The CFBP ensures that consumers get the information they need to make the financial decisions they believe are best for themselves and their families – that prices are clear up front, that risks are visible, that nothing is buried in fine print, and that consumers are able to make direct comparisons among products so that no provider is able to use unfair, deceptive, or abusive practices.
Two of the changes you can expect to see are with the old Good Faith Estimate and TIL disclosure as well as the old HUD-1/HUD-1A Settlement Statement and final TIL disclosure. These documents have all been given a makeover with new names and new looks.
The Good Faith Estimate and TIL disclosure are being replaced by the Loan Estimate, provided to the consumer by the creditor within three business days after application. The Loan Estimate form is a summary of loan terms, estimates of costs, and displays an estimated “Cash to Close.”
The HUD-1/HUD-1A Settlement and final TIL disclosure are being replaced by the Closing Disclosure, given three business days before closing. The Closing Disclosure may be provided by either the creditor or the settlement agent – which the creditor prefers. The new form will be required from mortgage applications on or after Oct 3, 2015.
The CFPB believes that combining several forms and additional statutory disclosure requirements into the two new Loan estimate and Closing Disclosure forms will reduce paperwork and consumer confusion. Requiring that consumers receive the Closing Disclosure at least three business days before closing on their mortgage loan will allow them time to better compare the final terms and costs to the terms and costs they received in the estimate, better equipping them to raise any questions before they go to the closing table.
Expect these changes with your forms.
Old Forms New Forms
TILA/GFE Loan Estimate
HUD-1/HUD-1A Final TILA Closing Disclosure
Not only has the CFPB decided that some forms needed a makeover, some of the terms you may have heard during a closing have changed as well. Below is a quick reference guide to some of those new terms.
Old TermsNew Terms
See the new forms and do a side-by-side comparison by going to: http://www.consumerfinance.gov/knowbeforeyouowe/compare/
Source: Capital Title of Texas, LLC www.ctot.com/
These changes were put in place to protect the consumer. We want to also provide a helping hand in you understanding your transaction with The Valerie Tolbirt Team. According to the Consumer Financial Protection Bureau there are some steps that we can take to better prepare our clients. Below you will find outlined the best advice we can give you to help prepare you for the changes and the new process when closing on your property.
- We encourage you to think through mortgage choices first.
Make sure you are comfortable that you can afford the home you like.
Review your credit reports early in the process.
- Once a property has been identified, we also encourage you to apply for Loan Estimates from multiple lenders.
Loan Estimates show rates and loan terms in an easy-to-compare format.
This will help you avoid second guessing whether you got the best deal.
- Make sure you indicate your intent to proceed.
Some loan estimates expire after ten business days. If you do not complete the steps required by the lender to express your intent to proceed, your application could be closed as incomplete.