By Carole Hawkins, [email protected]
New forms for closing a home loan have been finalized and go into effect Aug. 1.
Called the Integrated TILA-RESPA forms, they will change the way real estate agents, loan officers and vendors do business.
New forms? Ha! Realtors do not fear them — lenders will clear a path through the confusion. But, there are some impacts for which Realtors will want to be prepared.
The biggest is a requirement that says a homebuyer absolutely must get a copy of one of the forms, the Closing Disclosure, three days prior to closing the loan.
That could affect purchasing timelines for homes under contract.
Lenders are going to be cautious, because fines for non-compliance range from $5,000 to $1 million per day.
Sue Dutcher, associate Florida agency sales manager for First American Title Insurance Co., talked about the new forms at a November lunch meeting of the Mortgage Bankers Association of Jacksonville.
Know before you owe
As part of Dodd-Frank reforms, the Consumer Financial Protection Bureau streamlined and redesigned the disclosure forms that help borrowers understand what they’re getting into when they buy a mortgage.
At the surface, things seem simpler. Four old forms turn into two.
The first, the Loan Estimate form, replaces the Good Faith Estimate and the initial Truth-in-Lending Disclosure. It’s designed to help consumers understand key features, costs and risks of a mortgage. The form is sent within three business days after a mortgage application is submitted.
The second, the Closing Disclosure, replaces the HUD-1 Settlement Statement and the final Truth-in-Lending Disclosure. It’s designed to help consumers understand all of the costs of the transaction. The homebuyer must receive it no less than three days before closing.
The forms’ new look, at a glance, resembles changes developed a few years ago for credit card statements. They have large type and contain numbers about lending costs in bold.
Dutcher said there are three impacts from new rules Realtors are going to notice:
• Realtor contact information will appear. Not just a name and address, but also a license number, telephone number and email address. The Closing Disclosure form will now contain contact information for everyone involved in the transaction, including the lender, mortgage broker, settlement agent, real estate broker representing the seller and real estate broker representing the buyer.
• Real estate agents will have less flexibility in choosing title agents and closing attorneys. That’s because lenders, under the new rules, are now legally responsible for the actions of third-party vendors. Many lenders have started to create lists of approved vendors who follow industry best practices and those not on the list won’t be used. Vendors are now seeking new certifications that show they are best-practice-ready.
• Three-day timeline before closing. A homebuyer must receive the second form, the Closing Disclosure, no less than three business days prior to closing. Business days exclude Sundays and federal holidays. If the financials of the mortgage change substantially, it will require the buyer to be notified all over again.
Changes that reset the timeline include:
• The loan’s annual percentage rate changes by more than 1/8 percent.
• The loan program changes. For example, if it goes from a fixed to an adjustable rate loan or from adjustable to fixed.
• A prepayment penalty is added.
The three-day requirement effectively will eliminate any last minute closings, Dutcher said.
“We’re going to have real estate agents who call us on Friday morning and say, ‘We’re going to close this afternoon,’ and we’re going to say, ‘No we’re not,’” she said.