2 minutes reading time (426 words)

Effective October 1st! by Bill Clarke

Effective October 1st!  by Bill Clarke

Hold on to your hat, the mortgage market is about to experience a huge change.  Effective October 1, some of the regulations related to how consumers are informed of the expenses related to mortgage loans are about to have big revision.

Currently when a person applies for a mortgage loan, they are provided both a Good Faith Estimate and Truth in Lending forms. These forms help the consumer compare different rates and fees and also anticipate how much it will cost to obtain the mortgage. These two forms will now be combined into a Combined Loan Estimate form.  This form, as is currently required, must be delivered to the buyer not less than three business days after receiving an application.

The second area is where we can really expect to see changes. At closing, the final costs and fees are required to be made available to buyer through a HUD-1 Settlement Statement and Truth in Lending forms. These are being replaced by the Closing Disclosure form, which must be made available to the consumers at least three full days prior to closing.

Currently, the regulation allows the HUD-1 and Truth in Lending forms can be presented to the consumer as late as the day of closing and allows changes to be made to the HUD-1 statement during the closing. However, under the new regulation, the Closing Disclosure form must be provided at least three days prior to closing and if there are any changes during that 72 hour waiting period, the closing could be delayed. 

The new rules are created to provide the consumers with vital comparative information via a streamlined, less confusing application and closing process documentation.  These forms will disclose to the consumer, on one page, the most important data relating to the actual costs associated with obtaining the mortgage loan. This data provided on one page will include, the interest rate of the mortgage loan, the amount of the monthly payments and a detailed listing of all the closing costs etc.  If the loan has an adjustable rate, the documents will explain how the interest rate and future monthly payments could change  if the interest rate changes.

The key take away for all involved is, to expect delays and surprises on loan closing once the regulation becomes effective October 1.  It will take more time and more communication than ever before to close a loan. Delays will more than likely increase so plan for them and be prepared. I would suggest you contact your realtor or mortgage originator for questions and more detailed information.

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