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CFPB Changes from REAL

New Mortgage Disclosures in Effect Aug. 1

Prepare for delayed closings as the Consumer Federal Protection Bureau (CFPB) rolls out the new simplified mortgage disclosures.

Watch for changes to closing forms, coming soon as the CFPB rolls out a new rule.  The rule replaces the current forms with two new forms: the Loan Estimate, given three business days after application, and the Closing Disclosure, given three business days before closing. Lenders will be required to give consumers these forms for mortgage applications submitted on or after August 1, 2015.

CFPB Director Richard Cordray addressed the National Association of Realtors in May explaining questions surrounding the three-day requirement.

“The three-day requirement should not interfere with a successful closing, as some have claimed.  In fact, there has been some serious misunderstanding about what kinds of major changes would cause a delay of the closing date, so I want to take a moment to clear that up right now,” said Cordray.

“The timing of the closing date is not going to change based on any problems you discover with the home on the final walk-through, even matters that may change some of the sales terms or require seller’s credits.”

According to Cordray and, here are the three circumstances that would allow for closing delays:

Any increases to the APR by more than one-eighth of a percent for fixed-rate loans or more than one-fourth of a percent for variable-rate loans

The addition of a prepayment penalty

A change in the basic loan product, such as moving from a fixed-rate loan to a variable-rate loan.

However, Cordray did add a cautionary note, “We recognize that various other things can and do change in the days leading up to the closing, so the rule makes allowances for those ordinary changes without delaying the closing date in ways that neither the buyer nor the seller may be able to accommodate very easily.”

Consumer Benefits
Specific consumer benefits of the new forms and rules include:

Combining several forms and additional statutory disclosure requirements into two forms. This will reduce paperwork and consumer confusion.

Using clear language and design that will help consumers understand complicated mortgage loan and real estate transactions.

Highlighting the information that has proven to be most important to consumers. On the new forms, the interest rate, monthly payments, and the total closing costs will be clearly presented on the first page. This will make it easier for consumers to compare mortgage loans and choose the one that is right for them.

Providing more information about the costs of taxes and insurance and how the interest rate and payments may change in the future. This information will help consumers decide whether they can afford the mortgage loan and the home, now and in the future.

Warning consumers about features they may want to avoid, like penalties for paying off the loan early or increases to the mortgage loan balance even if payments are made on time.

Making the cost estimates consumers receive for services required to close a mortgage loan more reliable, for example, appraisal or pest inspection fees. The rule prohibits increases in charges from lenders, their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies. Examples of the specific exceptions include when information provided by a consumer at application was inaccurate or becomes inaccurate, or when the consumer asks for a change in the services.

Requiring that consumers receive the Closing Disclosure at least three business days before closing on the mortgage loan. Currently, consumers often receive this information at closing or shortly before closing.

This additional time will allow consumers to compare the final terms and costs to the terms and costs they received in the estimate. That will better equip them to raise any questions before they go to the closing table.

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