Posted on August 7, 2015 - 12:54 PM
by Natasha Hunter
New RESPA - TILA Integrated Disclosures
are scheduled to become effective October 1 for financed real estate transactions...
This is a second look at the newsletter I sent in April about the new RESPA-TILA Integrated Disclosures. From some of the emails and calls I get, many Realtors® are still unsure about how it may affect their deals.
While Realtors® won't be involved with direct compliance, they can be affected by the new rules and mandatory waiting periods. Now more than ever, we'll want to think a step or two ahead so we can act in our clients' best interests. Read through these basics, then call or write with any questions.
They may not have as much effect on you and your buyer as recent hype is leading you to believe.
Without good communication between all parties, the new Integrated Disclosures DO have the potential to delay your closing date beyond the one agreed to in your contract, though
they don't have to.
Let's start with a brief overview -
RESPA is the Real Estate Settlement Procedures Act which governs the actions of most everyone associated with a real estate transaction. This includes the lender, Realtor®, title company or closing attorney, insurance agency, appraiser, inspector, and surveyor.
TILA is the Truth In Lending Act which protects consumers' interests and rights in financed transactions such as mortgages, car loans, credit card accounts, and any other transaction where credit is extended to an individual.
Both of these Federal laws are now administered and enforced by the Consumer Financial Protection Bureau.
On October 1 of this year, changes are scheduled to take place in the application of both RESPA and TILA to financed residential real estate transactions.
The main changes Realtors® will see are in the forms used, and their State license numbers and contact info being included on the Closing Disclosure.
The new forms will give buyers more information about their financed transaction in an easier-to-read format. The timing of the initial disclosures (within 3 days of full application) remains the same, while there is a new advance notice requirement for buyers' receipt of the closing documents.
On all-cash deals, the title company or closing attorney
will still use the familiar HUD-1 Settlement Statement.
Additionally, there are new disclosure timing rules pertaining toChanged Circumstances that occur between application and closing. These are what could most affect closing timing.
click HERE for an example of the Closing Disclosure
Both examples are directly from the CFPB
Most of the compliance responsibility will fall on lenders and title companies/closing attorneys.
Preparation of the new Loan Estimate is now the lender's responsibility, though accurate input from the settlement agent is also required. Early communication and cooperation between them will lead to on-time closings.
Because variances (fee and cost changes) between the Loan Estimate and Closing Disclosure are limited by law, accurate initial disclosures are mandatory.
This is where those Changed Circumstances can come in and delay your closing if the Loan Originator isn't paying attention every step of the way.
Changed Circumstances are issues specific to the buyer ortransaction that were or become
unknown - inaccurate - new - changed
from the initial Loan Estimate disclosure that was given to the buyer, and cause the costs previously disclosed to change.
Lenders are required to reissue modified Loan Estimates whenever valid Changed Circumstances have a bearing onbuyer qualifying or transaction costs.
So what might cause a Changed Circumstance?
- Buyer/borrower's income, assets, or debts are not
as initially presented at PreApproval or application
- Buyer decides to lock loan interest rate after receiving
initial Loan Estimate, and available rate is now higher
than disclosed on LE
- Appraisal comes in lower than contract price, changing
Loan-to-Value ratio (LTV) and requiring Mortgage
Insurance or increasing the interest rate
- Home inspection reveals an issue which seller will
address through a price reduction or contribution
to closing costs
- Buyer decides to use a different settlement agent or
insurance agency, changing the closing costs and
escrow amounts on the initial LE
Each set of Changed Circumstances requires its own revised Loan Estimate, along with a new mandatory 3-day delivery and waiting period. If re-disclosures are required and your closing date is coming up soon, extensions may be needed.
Protect yourself and your closing timeline by having a trained,responsible, and accountable Loan Originator contribute to your deal.
Let me handle the details, timing, and compliance matters
while you take care of your buyers and sellers.
When buyers who want to use financing are properlyPreApproved, then guided all the way to closing, Changed Circumstances are minimized and properly managed.
Integrated Disclosures don't have to delay or stop your deals. I still suggest submitting contracts with 30-day Financing Contingencies and "on or before" 39-day closings from effective dates for conventional financing - as long as your buyer can provide requested paperwork in a timely manner.
Government-insured or guaranteed loan programs such as FHA, VA, and USDA will require longer to process and close.
Call me when your buyers first start looking. When they know what to expect and have the information they need, there's no reason not to hit your contract dates and arrive on time at the closing table.
Let me reinforce the trust
your buyer has placed in you! sm
All information provided by Chris Carter. See contact information below.
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