New Closing Procedures take effect August 1, 2015
By: Kathleen Floryan, Broker Associate, Ponte Vedra Club Realty
If you are planning to sell or buy a new house on or after August 1, 2015, it’s a good idea to know what the new government rules are that affect the closing process (transfer of ownership). This knowledge will be especially useful if your transaction includes a mortgage lender. These changes may affect your closing experience.
If you purchased a home in the past, you were familiar with the universal closing statement commonly known as the HUD-1. If you were getting a loan, a Truth in Lending Disclosure and a Good Faith Estimate were provided to you at the time of your application for the loan. All of these forms are going away. In their place are two new forms. The Closing Disclosure and the Loan Estimate. These forms will be available for you to review on the new Consumer Financial Protection Bureau website: http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
Beginning August 1, a Loan Estimate must be given to consumers within three business days of applying for a loan. At the same time, the HUD-1 Settlement Statement and the final Truth in Lending disclosure will be replaced by the Closing Disclosure form. This form must be given to consumers at least three business days before closing, and any significant late changes to the loan terms could start a new three-day disclosure waiting period and delay the closing. Some examples of a change that could delay the closing might be a request by the buyer to change the interest rate or the type of loan product. Other changes to the loan based upon underwriter recommendations or even changes by a buyer going through their walk through and discovering missing items that were to be included in the transaction may require lender approval. That lender most likely will not be at the closing table, so delays may happen at the last moment.
So what can you do to be prepared for a smooth closing? First, try to avoid any last minute changes by being prepared and ready at least 7 days prior to closing. All documents submitted to the lender, appraisal and inspections completed, contingencies removed, and walk-through’s completed 5 days before, not the day of the closing. This effort will require buyer/sellers, your real estate professionals, loan officers, loan processors, underwriters and settlement/title companies to plan ahead. Communications must be coordinated so everyone is on the same page and required performance activities strictly scheduled and documented. It has been suggested by the National Association of Realtors in webinars to realtors to add 15 days to the current standard closing time frame to help make the transaction smoother and more comfortable for all concerned.
If you are planning on getting a loan soon you can obtain A Special Information Booklet called “Your Home Loan Toolkit”. It will be given to you by your lender no later than three business days after you apply for your loan or you can get it here in an electronic version at http://www.consumerfinance.gov/learnmore/#respa
Sources: Understanding the Aug.1 Changes to HUD-1 Closing Process: ByRobert Freedman
February 17, 2015 National Association of Realtors