A better, but possibly slower step will add to the process of getting a mortgage effective Oct. 3.
Currently, homeowners in the United States with mortgages are safeguarded by two regulations, according to Zillow. The first one is The Truth In Lending Act (known as TILA) which requires lenders to disclose all mortgage terms and associated fees. The other one is The Real Estate Settlement Procedures Act (known as RESPA) which protects the mortgagor from exaggeratedly overblown real estate transaction costs by prohibiting different housing services providers from charging each other fees. Even so, homebuyers are said to still find the process of getting a mortgage surprising and confusing.
Come Oct. 3, Consumer Financial Protection Bureau (CFPB) will start simplifying those two regulations into two forms that homebuyers will find easier to understand. The homebuyer will receive a Loan Estimate Form at the beginning of the loan application and Closing Disclosure Form at the end.
The Loan Estimate Form, which a lender is required to provide within three days after the application was initiated, will contain detailed breakdown of fees, estimated cash at closing, rate, terms and other costs over the life of the loan. The Loan estimate will also help the borrower compare offers from different lenders and they must get the borrowers consent before they could proceed. Then at least three days before closing, the lender must send the Closing Disclosure Form which contains the actual cost versus what has been discussed as estimates, giving the homebuyer ample time to review final terms of the deal before signing it.
The new process sounds better as it gives the homebuyer better knowledge of what he or she is about to owe but some are concerned that this might delay closing by at least a week or more. This can happen if your lender prefers mailing documents rather than delivering them electronically. Moreover, the CFPB rules will not include Sundays and Holidays. In the case of delays in delivery, the lender will not be able to move forward without the borrowers consent, and consequently the closing will also be at a later time.
On the other hand, timing can be the answer to speeding up closing. The new process can actually help borrowers select the best lender. A good and efficient lender can provided these documents within the right time frame. The new CFPB rule may delay closing a week or two but the most important thing is that the consumer knows completely what he owes.
