Cause for Concern? New Disclosure Rules and Forms Debut August 1
The new disclosure forms taking effect the first of August might take a little getting used to, but the consensus is that their introduction should make transactions easier rather than more difficult. Two new forms mandated by Dodd-Frank will replace the 30-year-old sometimes confusing, sometimes conflicting and sometimes redundant TIL and GFE, as well as the HUD-1. The single new three-page Loan Estimate may be completed by either the mortgage broker or the lender at completion of a consumer “loan application.”
What Does It All Mean?
Specific definitions and requirements are well-detailed, and the form’s organization groups related information nicely. New definitions for “application” and for “business day” will eliminate disputes, and timing requirements are also well-defined.
Cost details are grouped; loan terms are specified clearly and in language that is easy to understand. Other disclosures and comparisons make the information easy to find and easy to explain. The long-term comparison, which is a new element, could require some adaptation on the part of lenders. Other disclosures, dealing with assumptions, refinancing, late fees and transfer of loan servicing, are to be specifically noted in black and white terms.
Because built-in tolerances (as they pertain to fee changes and adjustments) are more stringent, the new form will likely be more difficult for lenders and loan originators than for realtors and consumers. Zero tolerances in some cases, as well as information on fees that are “shopable,” are expected to result in more uniform and manageable practices over time.
Changes to the Loan Estimate are paired with changes to the Closing Disclosure. The new five-page document will call for extra vigilance on the part of the realtor to ensure accuracy. “Three-day prior” delivery also means that timing is more important than ever before in real estate.
With 2 months to get ready for the changes, the August 1 deadline still looms as a bit of an “unknown” in terms of compliance. The forms themselves, however, are straightforward and helpful, and the changeover should be greeted with high expectations.
UPDATE: The CFPB has just extedned the implementation until Oct. 1st because they need to correct an administrative error that was just discovered in meeting the requirements under federal law.