Importance Of Mortgage Regulations
Mortgage Regulations is created and implemented by mortgage regulators. The Consumer Financial Protection Bureau, CFPB, is the new sheriff in town for mortgage companies and is in charge of creating and enforcing mortgage regulations. The powerful CFPB has the right to investigate any violations by mortgage lenders and can assess fines and even suspend mortgage licenses of mortgage lenders who are not in compliance. The CFPB’s mission is to protect the public consumer and make sure that mortgage loan borrowers get treated fairly and that mortgage lenders be in compliance with advertising, issuing proper and timely disclosures, and not charge unfair fees and costs.
Applying And Qualifying For Mortgage Loans
The mortgage lending industry plays the most important role in our economy. Most home buyers need mortgage loans in order to be able to purchase a home. Without mortgage lending, the home buying process will come to an abrupt halt and consumers cannot be homeowners and enjoy the pride of home ownership. Most mortgage lenders have simplified and streamlined the very stressful and complex mortgage loan application and mortgage approval process to make it easier for the mortgage loan borrower. The many disclosures that need to be disclosed to mortgage loan borrowers and the number of documents that is required during the mortgage application and mortgage loan approval process is not the easiest to comprehend and understand. Due to the complexity and the difficulty to understand the HUD Good Faith Estimate and other mortgage disclosures, the CFPB, Consumer Financial Protection Bureau, has replaced the old HUD Good Faith Estimate with the CFPB New Loan Estimate effective October 3, 2015.
CFPB Loan Estimate: Effective October 3, 2015
The new mortgage regulations forms, the TILA- RESPA INTEGRATED DISCLOSURES, also referred as TRID, is the combination of four mortgage disclosure forms into two pages and was created and launched to make it easier for mortgage loan borrowers to understand. These forms are also called as Know Before You Owe mortgage disclosures because the CFPB wants mortgage loan borrowers to full understand what they are entering into before proceeding with the mortgage application and mortgage approval process.
Mortgage Process With The CFPB New Forms
Mortgage loan borrowers who are going through the mortgage loan application process, the mortgage lender needs to give the mortgage loan applicant these two forms. One of the disclosures that needs to be given is the Loan Estimate form, which is given initially. Down the mortgage loan process, the mortgage loan borrowers needs to be given the Closing Disclosure form, which replaces the previous HUD. The purpose for the Disclosure Form is so the mortgage loan borrower can examine and review the final mortgage loan numbers and terms of the mortgage loan before the mortgage loan borrower proceeds with closing the mortgage loan.
CFPB Loan Estimate Form
The CFPB Loan Estimate Form replaces the Good Faith Estimate and the Truth In Lending Form. The Loan Estimate Form needs to be disclosed to the mortgage loan borrower within three business days after the mortgage borrower completes the mortgage loan application. The Loan Estimate Form will consist of three pages. The first page of the Loan Estimate Form will contain the following information:
- Mortgage loan applicant information and information about the subject property
- Type of loan, the purpose of the mortgage loan, and the terms of the mortgage loan
- Estimated and projected monthly payments of the mortgage loan for the term of the loan
- Estimated closing costs of the mortgage loan and the amount of cash needed to close on the home loan
The second page of the Loan Estimate Form will categorize and break down the closing costs:
- Loan origination charges of the mortgage lender
- Third-party charges such a title charges, taxes, homeowners insurance, recording fees, and other third party charges
- Estimated cash required at closing disclosures
- Need to disclose interest rate table on adjustable rate mortgage if the mortgage loan is an ARM. Does not apply to fixed rate mortgages
The third page of the Loan Estimate Form shows information about your mortgage lender and explains whether this mortgage loan is right for you
- Contact information for your mortgage lender and name of your mortgage loan originator
- Comparisons of mortgage types and a table showing a comparison chart
- Other Considerations
After you have decided on your mortgage loan option, mortgage loan borrowers need to sign the Intent To Proceed Form in order for the mortgage loan process to proceed. The loan process cannot proceed if the mortgage loan borrower does not sign this form.
Closing Disclosure Form
The CFPB new closing disclosure form replaces the HUD-1 Settlement Statement as well as the final Truth in Lending Disclosure Form. Once its time for the mortgage loan to be ready to close, the mortgage lender will prepare the Closing Disclosure form which details the terms of your mortgage loan. The Closing Disclosure has been created and designed to simplify and replace the HUD-1 Settlement Statement and consists of the same information as the Loan Estimate but goes beyond where your escrow account information is added. The Closing Disclosure needs to match the terms that you initially agreed or a change of circumstances needs to be done and re-disclosed.
Same Day Or Rush Closings Will No Longer Exist
There will be a three day waiting period after the closing disclosure has been disclosed. The mandatory three business days needs to be given to the mortgage loan borrower so they can review the closing disclosure before they are able to close on the mortgage loan. In the event if the mortgage loan borrower request changes to the Closing Disclosure, a new closing disclosure needs to be issued by the mortgage lender and an additional three business days needs to be given in order for the mortgage loan to close. It is extremely important that you, as the mortgage loan borrower, acknowledge the receipt of the Closing Disclosure the minute you get the Closing Disclosure so the mortgage loan closing will not get delayed and your home loan will close on time.