Home Buyers and Agents, If Financing A New Home, Be Prepared for New Closing Forms - The Loan Estimate and Closing Disclosure

Beginning October 3, 2015, the Good Faith Estimate (GFE), the HUD-1 and the Truth-in- Lending Act (TILA) disclosures will be replaced in most transactions by two new forms – the Loan Estimate and the Closing Disclosure. 
The Loan Estimate will be required for most transactions in which a loan application was received on or after the effective date. It replaces the GFE and the initial TILA disclosures. The Closing Disclosure will be required for any transaction in which a Loan Estimate was issued. It replaces the HUD-1 and final TILA disclosures.
These changes are the result of Dodd-Frank legislation, enacted in 2011, which directed the Consumer Financial Protection Bureau (CFPB) to create rules and regulations integrating the GFE and HUD-1 forms with the TILA disclosures. The regulation is sometimes referred to as the “TILA/RESPA Integrated Disclosure Rule” because it seeks to integrate disclosures required by the Truth-in-Lending Act and by the Real Estate Settlement Services Act (“RESPA”). 
The new forms are designed to aid the consumer in comparison shopping, improve consumer understanding and prevent surprises at the closing table.

In general, the new forms and rules will impose no new legal obligations on agents and brokers and will not impact the day-to-day handling of sales. However, it is widely expected that the new forms and rules may create delays in closing. 

The Loan Estimate integrates and replaces the existing GFE and the initial TILA forms. It combines an estimate of loan costs and terms, along with various disclosures relating to the loan terms. 
Generally, the creditor must deliver or place in the mail the Loan Estimate no later than the third business day after receiving the consumer’s application, and delivery of the Loan Estimate must occur no later than the seventh business day before consummation of the transaction. This second rule will typically only impact extremely short escrows.

The Closing Disclosure integrates and replaces the HUD-1 and final TIL disclosures. It enumerates all of the actual costs of the closing and loan terms, along with various disclosures relating to the terms of the loan. The borrower must receive the Closing Disclosure no later than three business days before consummation.

For More Information on New Closing Procedures, please call me at 858-603-7879.