New Real Estate Closing Protocol from the Consumer Financial Protection Bureau (CFPB): Lenders Scramble to Comply and Posture for Position
The CFPB has issued an order to launch the new real estate closing protocol on August 1, 2015. This change is as spontaneous as a rocket launch. The methods of implementation and ensuing changes for title companies and lenders is still uncertain. How difficult can it be to merge two independently designed government forms into one comprehensive, understandable document? Clarity is a dear commodity in consumer lending. The affected players are a diverse group. Small and large title companies, local, regional and national mortgage lenders and banks, second mortgage finance companies each needs to determine how they will comply. These changes affect standard lenders primarily on real estate mortgages. Reverse mortgages, trailer homes, and lines of credit are exempt from these disclosure rules. Traditionally, lenders and title companies provided their own closing documents: truth in lending documents and HUD-1 forms respectively. These two forms use different language and disclosure mechanisms to explain the real estate closing to the buyer. The Consumer Financial Protection Bureau mandate requires these two documents be merged into two uniform disclosure forms:
- The Loan Estimate must be provided to the consumer within three days of application.
- The Closing Disclosure must be provided three days prior to closing, and any changes restart the clock to earliest closing.