Effective August 1, 2015, at least three business days prior to the date of consummation of the transaction, the lender must deliver the new Closing Disclosure to the consumer (according to the Consumer Financial Protection Bureau). The newly named Closing Disclosure takes place of the HUD Settlement Statement.
Let’s take a look at the timing of this new form. For example, the Closing Disclosure must be delivered on Monday or earlier, if the settlement is scheduled for Thursday. If changes occur between the time the Closing Disclosure form is given and the closing, a new form must be given to the consumer, along with three additional business days to review the form before closing. This will directly effect how real estate is further done around the country.
Also, it will take careful planning to coordinate back to back closings and other special situations, so to be safe; more days to close should be added into the contract for buffering purposes. However, additional days in the contract from possibly 30 to 45 will not completely solve the problem due to lender compliance obligations and the sequence of events that will be necessary. Lenders are to comply with new upcoming TILA-RESPA Integrated Disclosure rules (TRID). Compliance with these new rules and regulations requires major systems and operational changes.
The starting point for three-day period is the day of consummation (closing date). Once you have the projected closing date, then you need to count backwards. The three-day rule requires the counting of “business days,” which are “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a).” The best way to keep everyone happy is to prevent any delays, so we suggest fully understanding the changes that require the lender to provide a new Closing Disclosure should there be an additional three-business-day waiting period. Such changes include the following:
- Changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods).
- Changes to the loan product.
- The addition of a prepayment penalty to the loan.
Important to note that the CFPB has mandated that the lender will be ultimately responsible for delivery of this form, not the title agency. Physical delivery or electronic delivery is allowed in accordance with the E-SIGN or Uniform Electronic Transaction Act laws. The timing requirements are the same as for physical delivery and would require obtaining some evidence of receipt. At this point in time, several of the major lenders have already announced that they will be handling the delivery to the consumer.
If you are a real estate agent or you are selling your house FSBO, here are some helpful tips to remember:
- Make sure your buyers are prequalified before signing a contract.
- Get all information – commission, admin fees, charges, bills and receipts to your title company as soon as possible. We will have to send to the lender much earlier now. No last minute changes!
- Build in plenty of room for the closing date. Intimate cooperation with your loan officer and lender will be a must as to their approval and new compliance process.
- Lenders will be under new compliance regulation which is going to slow down the process.
- More attention must be paid to the completeness of the contract signature page as to:
- Proper Legible Full Names
- Deed To: Middle initials on the buyers
- Email Addresses for all parties.
- Phone Numbers for all parties.
- Have a title examination done at the time of listing so any title issue can be worked out well before it derails your closing!
At Eagle, we want all of our transactions to be as smooth and swift as possible, which is why we aim for full understanding of complex rules and regulations. Contact us today for more information.