New changes have come to the mortgage industry, and they’ll either:
- Delay your closing and give you a big headache
- Or delay your closing but keep everything on track
And it all depends on who you’re working with, starting with your real estate agent.
First, a little background:
“Mortgage lenders and real estate agents are bracing for the…implementation of a five-year-old law that has forced them to overhaul the way they process sales,” said the Wall Street Journal. “The changes, prompted by the 2010 Dodd-Frank financial law, are meant to help consumers better understand the terms of their mortgages before they sign on the dotted line.
But some in the real-estate industry worry that the rest of the year could be marked by delayed closings, frustrated borrowers and confused real-estate professionals as they adjust to the new rules.”
It’s that last part that has people concerned, because it essentially spells the end of the 30-day close.
“Mortgage originators and real estate agents fear the new rules will delay the closing process, especially when they first go into effect,” said US News. The National Association of Realtors has advised its members to add 15 days to contracts.”
You can thank the Consumer Financial Protection Bureau for this change—one that is intended to stem the kind of loan debacles that helped caused the real estate crash of the former decade, like low teaser rates with balloon payments that often led to foreclosure.
“At heart, the changes simplify forms long required by the federal government that disclose loan terms, such as a mortgage’s interest rate and prepayment penalties. The rules also require that consumers see the final terms at least three business days before closing, a change meant to ensure they have time to understand what they’re agreeing to.
The three-day rule, plus the shorter, more condensed version of the disclosure documents, often referred to as “Know Before You Owe” docs, are intended to give buyers time to digest the loan terms.
“Current potential homebuyers receive a Good Faith Estimate and a TILA (Truth in Lending Act) disclosure, a HUD-1 and a closing TILA document in addition to other servicing documents,” said The Street. “The new disclosure documents will be limited to two documents and will also be shorter.”
Mortgage folks have ostensibly been training to make sure they are aware of all the new details, and were already given more than a two-month reprieve from the original effective date—“The new rules were scheduled to go into effect Aug. 1, but they have been delayed about two months to give the industry time to prepare for the changes and make sure all the systems are in place,” according to US News.
Now that the day is here, it’s more important than ever to make sure you’re working with a team you can trust. An experienced L.A. real estate agent is not only going to help buyers navigate what is now an even more complicated process (even though the intention was to un-complicate it, ironically) and educate them on the details that are critical to a smooth transaction, but should also be connected to quality mortgage professionals who can do their part in keeping your deal on track.
Tripp Jones Real Estate for Santa Clarita and San Fernando Valleys, Call 661-733-4555 or 818-527-6292