Understanding New Mortgage Disclosure Rules

Understanding New Mortgage Disclosure Rules

As a new homeowner, be sure that you get all the details about the property you are purchasing. Starting October 1, 2015, regulations go into effect that require lenders to provide consumers not only with new mortgage rate documents, but will also require more time built into the process for review. Below is a brief summary on the new regulations.

The Background

When consumers finance a home in the US, they are protected by two sets of regulations. The first is the Truth in Lending Act, which standardizes how mortgage terms and fees are disclosed and standardized. The other is the Real Estate Settlement Procedures Act, which stops the various housing and mortgage service providers from paying client referral fees. These two regulations were created in 1968 and 1974, and the enforcement of the regulations has been transferred to a new agency – the Consumer Financial Protection Bureau. This agency exists due to the financial crisis of the late 2000s, created as a method of consolidating all of the consumer financial protection agencies.

When the new regulations come into effect, the CFPB will combine all of the disclosures that were mandated under the earlier regulations into a pair of forms.

The Disclosures

Currently, consumers are given a pair of disclosures when they get a mortgage. The first comes at the beginning of the process, and the second at the end. The first disclosure is actually two separate documents that give you information about your rate, fees, terms, and costs. Before closing on the property, the lender must give you the second form, the HUD-1. This breaks down all of the fees for the property transaction, including the cash needed to close. The individual taking out the mortgage would also receive a final Truth in Lending form at this point.

It has been decided that this process is too confusing, as consumers don’t get to see a breakdown of all the fees until they come to the closing. At that point, the consumer may not feel comfortable making any changes. Under the rules, consumers will receive a different set of disclosures.

The first set of disclosures will come within three days of applying for the loan. This Loan Estimate Form will provide the line-item breakdown of fees that were featured in the HUD-1. The lender will then have to obtain the consumer’s intent to proceed before moving on with the loan. At least three days before closing, the lender will get a Closing Disclosure Form, which should look very similar to the first form. This will separate out the costs paid by each party, and give consumers a chance to view all of the information at their leisure – but it may also slow down the process of closing on homes for sale in Hinesville GA.

Understanding these new mortgage disclosure rules can be difficult for some, and as such our staff is available to answer any questions that you may have about this topic.

To learn more about the new regulations or about buying real estate for sale in Hinesville GA, make sure to contact us today!