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How New CFPB Rules Will Affect A 30 Day Close

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How New CFPB Rules Will Affect A 30 Day Close

The Down Low

New rules affecting funding and closing of real estate loans are set to go into affect on October 3, 2015.  How will these rules affect real estate transactions?  One thing we know for sure is that getting a loan to close and fund in 30 days will no longer be a reality based on the new notification periods that are now required. Forms used in the process have also been combined and streamlined, a better thing for the consumer. Why are these changes being implemented? Who is the CFPB?  A little history.

 

A Brief History

The Consumer Financial Protection Bureau (CFPB) is an independent U.S. government agency that is responsible for consumer protection in the financial sector.  The CFPB’s creation was authorized by the the legislation known as the Dodd-Frank Act, whose passage in 2010 was a legislative response to the the financial crisis that began in 2007 and 2008. When it was originally created one of the first mandates was to go after credit card companies who charged large annual percentage rates (APR) to consumers. Since then its jurisdiction includes bank and credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services and other financial companies that deal directly with consumers in the U.S. The CFPB formally began operation on July 21, 2011. The new changes being implemented affect documentation used in the settlement of a financed real estate purchase and require mandatory notification periods, which reset if anything in the loan or transaction materially changes. You will hear the transactions distinguished as HUD (old procedures) and TRID (new procedures) initially as lenders, title companies, realtors etc. try to make sense of it all.  After October 3, 2015 all transactions will be TRID.

 

What The Change Is All About

You’ll hear a lot of acronyms getting batted around, here is basically what is going on.  The old Good Faith Estimate on a loan that consumers received along with the initial TILA form (Truth in Lending Act) are being replaced by one document called The Loan Estimate.  This is supposed to be written in plain english making it easier for consumers to determine interest rates and cost’s associated with getting the financing to purchase real estate. The second change has to do with the HUD-1 that has been required since the Real Estate Settlement Procedures Act (RESPA) was passed in 1974.  In 2010 they made changes to RESPA requirements and the HUD-1 as a response to the financial crisis. At the time you are given the HUD-1 you are also provided the final TILA form.  Both of these forms are now being combined into one document as well called the new Closing Disclosure as shown in the graphic below.

TRID

So here comes the mother of all acronyms, TRID stands for TILA / RESPA Integrated Disclosures.  Don’t worry there wont be a test!  If you would like sample copies of the forms or more info on all of this (because you have trouble falling asleep) you can send me a message here and ask for the PDF version of the documents.  They were thoughtfully provided by our friends at Fidelity Title.

 

Net Effect of the Change

While everyone believes it will take longer to close a financed transaction and that the 30 day close is a thing of the past there are no hard and fast rules yet about timing.  I hear everyone saying 45 days and if in fact thats what gets written into contracts thats probably what will happen’s.  There is an old saying that “Luck Favors The Prepared” and I believe that some lenders, title companies and escrow companies have been way out in front of this change since the beginning.  In fact the original date to switch over was back in August 2015 and a decision was made to extend it to October 2015, probably because nobody wanted to deal with this during the busy summer selling season. For those who are not prepared expect major delays and confusion regarding the implementation of these new rules and notifications.  The notifications are the major reason transactions will slow down as they will add at a minimum 10 days to the transaction (if digital signing can be implemented into the delivery period) thus the 40 day plus discussion, unless the service providers are on their A-game .  Another transaction that isn’t getting much conversation yet is the concurrent close (when a buyer sells a house and closes at the same time on a new home they purchase). I just can’t see that being being pulled off anymore as it was already complicated enough prior to TRID.

 

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About the CoastLifeTeam

Headed by local San Diego realtor, Dana Harris, the Coast Life Team promises a real estate experience like none other. With over 25 years of real estate, negotiation, marketing, advertising and management experience, Dana has a proven track record. He likes to practice what he calls “delivering the unexpected” providing his clients with the highest degree of service, integrity, transparency and ethical standards. Dana grew up here, raised his children here, is actively involved in the local community, has been a frequent radio show guest on local station 760 KFMB, and has worked here in the San Diego coastal area for most of his life. He is a Realtor with Coastal Premier Properties, in the Del Mar Village office, and specializes in the North County Coastal areas of San Diego, which includes Del Mar, Carmel Valley, Rancho Santa Fe, Solana Beach, Cardiff, Encinitas and Carlsbad. Contact Dana today to start searching for the home and lifestyle of your dreams.  He can be reached at (858) 609-0900.

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