New home buying legislation effective 10-3-15
Mortgages are complicated often causing confusion for many homebuyers. There are multiple disclosure forms, overlapping information and lengthy fine print. To reduce complexity and create transparency, the Consumer Financial Protection Bureau is implementing new disclosure rules that will:
- Condense multiple forms and requirements into two forms
- Use plain language
- Outline key points integral to the transaction from a consumer standpoint
- Provide clearer understanding of associated costs
What does this mean if you are buying or selling a home? Primarily, this policy will ensure that consumers no longer review paperwork for the first time when sitting down at the closing table. Consumers will now receive final documentation three days before final closing providing sufficient time to review, understand and ask questions before signing.
Most of this new documentation will be done electronically and should, in theory reduce paperwork. It will however, be time sensitive requiring clients to be more involved for the process to remain on schedule.
Current industry standards allow for a 30-day closing period. After October 3, 2015, a 45-day (or longer) time frame will become the norm. It will require a greater level of partnership between realtors and mortgage services, as well as realtors and clients, to work together efficiently and adhere to the allotted time frames.
To assume a 45-day process, it is imperative that borrowers pre-qualify. As a homebuyer, decide on a lender early in the home buying process, preferable before going under contract. Get pre-approved to avoid filing delays. The new ruling insures less than a 1/8 point rate variance from beginning to end of process so consumers no longer need to wait to the last moment to sign.
Your agent is essential to a timely close. A realtor should facilitate choosing the right lender, ensure you are electronically accessible and recommend local resources. To protect clients from missed closing dates, realtors will need to have a “transaction to close” person or will need to take this role on themselves.
Now more than ever it is important to choose your real estate agent wisely. As of September 1, the National Association of Realtors reported that only 45% of all agents have been educated on this new legislature. Ask your broker if they have attended a seminar or are knowledgeable about the new process.
While the new legislature offers homebuyers a greater understanding of the process, the new process has a domino-like effect. Each transaction date must be met to finish on the end date: if one date is missed, it sets the entire schedule back. Never before rang truer the words “time is money.”
Article first appeared in the Four Points News, Volume 11, Issue 36, page 4.