New Changes In Home Buying Process Takes Effect October 3 2015

The Consumer Financial Protection Bureau, also known by many as the CFPB, has implemented new changes in home buying process which took effect October 3, 2015. The new changes in home buying process was implemented by the CFPB to further protect home buyers and simplify the old HUD Good Faith Estimate and Truth In Lending Disclosures and make it easier to understand for the mortgage loan borrower. One of the mission in mind in implementing the new changes in home buying process by the CFPB is for consumers to know before you owe philosophy.

What Is Know Before You Owe?

The CFPB has given the Know Before You Owe principle in making the new changes in home buying process.  After the 2008 Real Estate and Mortgage Meltdown, the Dodd Frank Act was created and the Consumer Financial Protection Bureau was created. The powerful CFPB is now the regulator of the mortgage industry and its mission is to protect the public consumer and enforce mortgage regulations and discipline banks and mortgage lenders who are not in compliance with regards of disclosures and advertisement. The Dodd Frank Act has directed the Consumer Financial Protection Bureau to create and improve procedures for home purchase by home buyers in the wake of the 2008 real estate and mortgage meltdown. Know before you owe is the objective of the Consumer Financial Protection Bureau and has been so since its inception in 2010.

How Does New Changes In Home Buying Process Affect Home Buyers

The biggest changes with the new changes in home buying process is the elimination of the Good Faith Estimate and the HUD-1 Settlement Statement. The Good Faith Estimate and Truth In Lending Disclosure will be replaced with the new Loan Estimate and the HUD-1 Settlement Statement and final Truth In Lending Disclosure will be replaced with the Closing Disclosure. These two forms are the paperwork and disclosures that mortgage loan borrowers receive in the beginning and at the end of the mortgage application and mortgage loan approval process.  These changes already took effect on October 3, 2015 and the mortgage loan applications that were taken prior to October 3, 2015 will be regulated under the old mortgage rules.

How Is The Closing Documents Different Than The HUD-1

Prior to this new change in home buying process, the HUD-1 Settlement Statement was issued prior to closing where all of the figures and line items of closing costs was disclosed. A preliminary HUD was normally issue several days before the final HUD-1 Settlement Statement was prepared. Besides the HUD-1 Settlement Statement, mortgage loan borrowers were also disclosed with a separate Truth In Lending Act disclosure form.  Both the HUD-1 Settlement Statement and final Truth In Lending Act Disclosure Form are now replaced with a single Closing Disclosure Form. The closing disclosure form consists of several pages and it was designed to replace the HUD and TILA to make it easier for the mortgage loan borrower to understand and simplify the line items and closing costs and fees. The main page of the Closing Disclosure Form includes the borrower’s monthly housing payments, total payments, total closing costs and itemization of closing costs and fees, and pre-payment penalties that may apply, any balloon features to the mortgage loan if applicable, and potential mortgage rate changes during the term and life of the mortgage loan. The Closing Disclosure page one was created to the many complaints about the practices that affected mortgage loan borrowers during the 2008 Real Estate and Mortgage Meltdown. The remaining pages of the Closing Document is almost the same as the previous HUD-1 Settlement Statement which categorizes the cost and fees of the home buyer and the home seller in great detail.

When Does The Borrower Get The Closing Disclosures?

Mortgage lenders now will be required to disclose the Closing Disclosures three business days prior to closing. The three day waiting period was created and implemented so mortgage loan borrowers have enough time to examine and review the closing documents. If the mortgage loan borrower needs to address any changes, then the mortgage lender needs to make the correction and re-disclose the amended closing documents and there will be another three business day waiting period.

The Loan Estimate

When a mortgage loan borrower first applies for a mortgage loan, mortgage lenders were required to give the Good Faith Estimate within three days of taking a mortgage loan application. The Good Faith Estimate, also known as the GFE, will be replaced by the Loan Estimate. The purpose of the Loan Estimate was to make it more easier for mortgage loan borrowers to understand and help mortgage loan borrowers to shop for the best mortgage rates and terms available. The new changes in home buying process will definitely affect home buyers, home sellers, and mortgage lenders where last minute closings will no longer be available and most mortgage loans will take much longer to close. Banks and mortgage lenders will also incur more fees and costs due to the added compliance which will get trickled down to mortgage loan borrowers.


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