New loan disclosures and closing procedures take effect for home loans originated after October 3, 2015, with the purpose of making the process of buying and financing a home less confusing for consumers.
Some basic changes…
- All lenders must use the same new disclosure forms created by the Consumer Financial Protection Bureau
- Makes it easier to comparison shop for a loan on a property because the forms will be the same from each lender
- Lender must provide a loan estimate within 3 days of loan application
- Lender prepares the closing disclosure in the same format as the loan estimate and delivers to the consumer at least 3 days prior to closing
- Allowing for required delivery time, plan that everything must be ready about a week before closing… the 3-day window for buyer review is NOT waivable
- Using the same format as the estimate makes it easier to compare the two
- Any changes to the loan after this point trigger another waiting period, meaning last-minute changes will not be possible
The biggest impact on actual closings will be the timeframe and who does what. In the current system, the title company closer prepared the closing statement based on information sent from the lender. Going forward, the lender will prepare the closing disclosure and deliver to the buyer about a week prior to closing.
- Consumers will have at least 3 days to review the closing disclosure and discuss with their lender prior to closing
- Closers won't have to scramble to prepare last-minute closing packages
Time frame changes…
- Allow at least 45 days from the date of loan application (after signing purchase agreement) to closing
- If buyer plans to shop around for mortgages after signing the purchase agreement allow even more time, maybe 60 days
- Buyer's intent to proceed needs to be expressed within 10 business days of application
- Quickly submit all documentation asked for so that doesn't cause unnecessary delays
As with any change, there will likely be some hiccups as the new forms and procedures are implemented… but I expect the long-term effect will be less confusion for buyers and less stress for closers.