Federal Housing Administration home loans are getting a tuneup, with many changes that went into effect Oct. 4. 2015.
Before today, consumers must receive two sets of disclosures when getting a mortgage — one set at the beginning and one set at the end, as follows:
- Within three days of you applying for a home purchase loan, the lender must send you a Good Faith Estimate and an Initial Truth In Lending disclosure, which together show your quoted rate, sum of fees, terms and costs over the life of the loan.
- Before closing (even if it’s the day of closing, which it often is), the lender must send you a HUD-1, which is a line-item breakdown of all fees for the transaction, including final cash needed to close, and a final Truth In Lending disclosure so you can see if it’s different from the one you saw in the beginning.
The CFPB deemed this process too confusing for consumers because, under the old process, the first time a consumer sees a formal breakdown of all fees is on the HUD-1, when they come to the closing table. By then it may be too late, or the consumer may feel too pressured, to make changes.
Therefore, under the new TRID rules effective with all new applications October 4th 2015, consumers will receive two disclosures — one at the beginning and one at the end, as follows:
- Within three days of you applying for a home purchase loan, the lender must sent you a Loan Estimate Form, which provides a detailed line-item breakdown of fees, cash needed to close, rate, terms and costs over the life of the loan. The lender must also obtain your intent to proceed before they can move forward.
- At least three days before closing, the lender must send you a Closing Disclosure Form, which looks almost exactly like the Loan Estimate, but also separates which costs are paid by the buyer, seller, and third parties. This means you’re reviewing final terms in the same format you saw initially, and you’ve got time to digest it.
That extra time, while intended as a consumer protection, adds time to the closing process. Talk to your lender and realtor about their process for handling the new rules.”
“Two Key Changes Associated with the New Closing Disclosure:
- The lender, not escrow, is now responsible for preparing the Closing Disclosure.
- The Closing Disclosure must be received by the buyer 3 business days prior to signing closing documents. If a borrower acknowledges receipt the same day the CD is created, the wait is only 3 days, however, if a document must be mailed to the borrower, the wait period can be up to 6 business days before signing can occur.
As a result of the changes, there will be additional time between final loan approval and recording of the loan. Therefore, communication with the lender becomes increasingly important; any delays in providing documentation or changes to closing figures can cause delays in the preparation of the CD and thus in closing.”
Want to know more? Please email me at firstname.lastname@example.org If your agent isn’t aware of the new rules, you may be in for a wild ride!
All information was taken from the following articles….