RESPA Changes to Closings as Impacted by CFPB – Beginning 8/1/15 – DELAYED UNTIL 10/1/15
The Dodd-Frank Act which was enacted on November 20, 2013 mandated integrated Mortgage Disclosures between RESPA (Regulation X) & the Truth in Lending Acts (Regulation Z.) This merger now falls under the Consumer Financial Protection Bureau (CFPB.) These stringent changes go into effect August 1, 2015 and your closings will be affected. The Closing Disclosure is completely different, disclosure time-frames are different, any re-disclosures require a 3-day delay in closing, back-to-back closings will be EXTREMELY difficult, the Closing Disclosure is now 5 pages & there are more changes! Thank you to ALL of the Maximum One Affiliated Attorneys & Lenders for their ongoing information & training on this topic in Sales Meetings since January! Please consult with your Affiliate – see contact information below!
The Closing Disclosure is now 5 pages. Click for a sample: Sample Closing Disclosure.
There are some new Terms with which to be familiar:
- CFPB = Consumer Financial Protection Bureau
- TILA = Truth in Lending Act (Regulation Z)
- RESPA = Real Estate Settlement Procedures Act (Regulation X)
- TRID = Combination of TILA & RESPA
- LE = Loan Estimate (Eliminates GFE = Good Faith Estimate & initial TILA disclosure
- CD = Closing Disclosure (Eliminates HUD-1 & final TILA disclosure)
The Lending Disclosure Time Frames have also changed. Here is the Loan Estimate Timing:
- Day 0 = Consumer submits all 6 pieces of information for application. This starts TRID timeline
- 3rd Biz Day = LE due to Consumer 3 business days (or less) from application submission
- 7th Biz Day = 7 days MUST pass after LE delivery to borrower before closing is possible
- 10th Biz Day = LE is valid / lender is bound by the terms for 10 business days after its delivery to the borrower. Borrower must indicate intent to proceed within this time to “lock-in” the terms of the LE
- 3rd Biz Day PRIOR TO CLOSING = ALL documents must be delivered to the borrower no later than 3 days prior to closing. Specific tolerance levels exist between LE & CD which must be adhered to
- Closing = Closing Date
Due to these changes, you must be prepared as a real estate agent & be ready to set the proper expectations with your clients. Below are a few suggestions:
- Check on repairs at least 7 – 10 days PRIOR to closing. If the Buyer & Seller end up negotiating financially for repairs which have not been completed, this will have to be re-disclosed on the Closing Statement. Ensure plenty of time for these re-disclosures so as not to delay closing.
- Schedule closings mid-month & at the beginning of the week.
- Many Lenders (especially large banks) will be preparing the Closing Statement – NOT the Closing Attorney.
- Lenders preparing Closing Statements may NOT have accurate nor current HOA documents – which will inevitably cause a delay & the requirement of a new HOA Transfer Letter or Disclosure Letter which will cost the Buyer or Seller money.
- Contracts binding under the RE Forms Contract do NOT allow for a Unilateral Extension of Closing Date – if Buyer’s Lender must re-disclose & cause a delay, if Seller does not agree to an extension, Buyer will default on the contract.
- Consider scheduling closing PRIOR to the actual end date of the contract.
- Closings may take closer to 2 hours
- Back-to-Back closings will be EXTREMELY Difficult due to potential re-disclosure issues
- Agents may not use Closing Attorney’s computers (i.e. to print an Amendment) so bring your file with you & Blank Amendments
- The Key for you as an agent is to stay in constant and meaningful communication with the Lender and Closing Attorney as well as your clients, customers and co-op agents.
- Stay as informed and current as possible on the impact of these changes.
- As they changes first become enacted, it will be vital to utilize Lenders & Closing Attorneys whom you know, love, trust & have a good relationship.
- Remember that PATIENCE is a virtue!
Maximum One Greater Atlanta is hosting many CE Classes taught by our Affiliated Lenders and Closing Attorneys for further information / education & to answer your specific questions. This 3 Hr CE class is called: “Show Me the Money & Get Me to Closing.” There are 2 classes scheduled in June & 2 scheduled in July. We WILL schedule more CE Classes on this topic in July & August.