Mortgage Regulations

How Mortgage Regulations Affect Homebuyers and Closings

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will discuss and cover mortgage regulations and how they affect homebuyers and closings. Mortgage Regulations are 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 lenders and can assess fines. CFPB can even suspend the licenses of lenders who are not in compliance.

What Is The Role of the CFPB?

The CFPB’s mission is to protect the public consumer. CFPB’s role is also to make sure consumers get treated fairly and lenders are in compliance with advertising, issuing proper and timely disclosures, and not charging unfair fees and costs. In this article, we will discuss and cover Mortgage Regulations And How It Affects Buyers And Closings.

Applying and Qualifying For Mortgage Loans

The mortgage lending industry plays the most important role in our economy. Most homebuyers 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. Consumers cannot be homeowners and enjoy the pride of homeownership. Most mortgage lenders have simplified and streamlined the very stressful and complex mortgage loan application and approval process to make it easier for consumers.

The Importance of Following Mortgage Regulations in Disclosing the Proper Mortgage Loan Disclosures

The many disclosures that need to be disclosed to consumers. The number of documents that are required during the application and loan approval process is not the easiest to comprehend and understand.

Due to the complexity and the difficulty of understanding 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.

Mortgage Regulations: CFPB Loan Estimate

The new mortgage regulations forms, the TILA- RESPA INTEGRATED DISCLOSURES, also referred to as TRID, is the combination of four mortgage disclosure forms into two pages:

  • It was created and launched to make it easier for borrowers to understand
  • These forms are also called Know Before You Owe mortgage disclosures

This is because the CFPB wants borrowers to fully understand what they are entering into before proceeding with the mortgage application and approval process.

Mortgage Process With The CFPB New Forms

For borrowers who are going through the mortgage loan application process, the lender needs to give the mortgage loan applicant these two forms. One of the disclosures that need to be given is the Loan Estimate form, which is given initially. Down the mortgage loan process, the mortgage loan borrowers need to be given the Closing Disclosure form, which replaces the previous HUD.

The purpose of 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

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 consumers within three business days after the mortgage applicant completes the loan application. The Loan Estimate Form will consist of three pages.

First Page of the Loan Estimate

The first page of the Loan Estimate Form will contain the following information:

  • Applicant information and information about the subject property
  • Type of loan
  • Purpose of loan
  • Terms of loan

Estimated and projected monthly payments for the term of the loan:

  • Estimated closing costs of the loan
  • Amount of cash needed to close on the home loan

Second Page of the Loan Estimate

The second page of the Loan Estimate Form will categorize and break down the closing costs:

  • Loan origination charges

Third Page of the Loan Estimate

Third-party charges such as the following:

  • title charges
  • taxes
  • homeowners insurance
  • recording fees
  • other third-party charges

Cash To Close  

Estimated cash required at closing disclosures:

Understanding The Loan Estimate

Understanding The Loan Estimate

The third page of the Loan Estimate Form shows information about the lender and explains whether this loan is right for the consumer:

  • Contact information of lender and name of mortgage loan originator
  • Comparisons of mortgage types and a table showing a comparison chart
  • Other Considerations

After borrowers have decided on the mortgage loan option, borrowers need to sign the Intent To Proceed Form in order for the mortgage process to proceed. The loan process cannot proceed if the borrower does not sign this form.

Mortgage Regulations: Closing Disclosure Form

The CFPB’s new closing disclosure form replaces the HUD-1 Settlement Statement as well as the final Truth in Lending Disclosure Form. Once it’s time for the mortgage loan to be ready to close, the lender will prepare the Closing Disclosure form which details the terms of the mortgage loan.

HUD-1 Settlement Statement

The Closing Disclosure has been created and designed to simplify and replace the HUD-1 Settlement Statement. Closing Disclosure consists of the same information as the Loan Estimate. But goes beyond where 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 With New Mortgage Regulations

There will be a three-day waiting period after the closing disclosure has been disclosed. The mandatory three business days need to be given to borrowers so they can review the closing disclosure before they are able to close on the mortgage loan. In the event, that a borrower request changes to the Closing Disclosure, a new closing disclosure needs to be issued by the lender and an additional three business days need to be given in order for the mortgage to close. It is extremely important borrowers acknowledge the receipt of the Closing Disclosure the minute they get the Closing Disclosure so the loan closing will not get delayed and the home loan will close on time.

This article on How Mortgage Regulations Affect Homebuyers and Closings was written by Michael Gracz and updated on October 16th, 2022


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