WHAT THE NEW MORTGAGE PROCESS MEANS FOR CONSUMERS


The Consumer Financial Protection Bureau’s new closing rules go into effect Oct. 3. (Consumer Financial Protection Bureau)

David Charron, president and chief executive of Rockville-based multiple-listing service MRIS, writes an occasional column about the Washington area real estate market.

Change is scary. It takes us out of our comfort zone and entrenched habits. It forces us to work in new and different ways.

But with change comes the opportunity to reexamine processes. It’s a chance to do things better and more efficiently. One impending change roiling the mortgage world is aimed at bringing clear language and design to make it easier for consumers to locate key information, such as interest rate, monthly payments and costs associated with closing the loan.

Come Oct. 3, the Consumer Financial Protection Bureau (CFPB) is mandating new forms and regulations for any party involved in a mortgage settlement. This includes buyers, sellers, agents, lenders and title companies.

[Closing on a home in the fall? Here’s how a change aimed at helping you could snag you.]

The most noticeable of these changes involves the revision of several forms, including the HUD-1 settlement statement, to create two new streamlined forms — the Closing Disclosure and Loan Estimate. These will lay out loan financials and closing costs in two documents instead of the multiple, redundant forms that were previously used.

The other major change is what’s being referred to as the “three-day rule.” Previously, changes to the loan or closing financials could be made in real time, up to and including at the settlement table. Now, certain changes will trigger a three-day review period that must be observed before a closing can occur.

The CFPB made these changes to better protect home buyers and inform them of consequences of changes to lending or closing costs. This is a good thing, as an informed buyer is more likely to make better decisions, which will lead to a healthier overall market.

[New federal rule on home closings delayed]

But until everyone becomes acquainted with the new regulations, there is the possibility for confusion and delay. We asked several local brokers what they thought would be the consequences of the new CFPB rules:

• Louis M. Pope, broker and owner of Century 21 Trademark Realty:

In the first several months, lenders and title companies will follow these new rules very strictly. Over time, everyone will develop methods to solve last-minute problems. One issue that could arise is if there are multiple transactions. The additional wait could jeopardize a series of settlements. This would cause multiple buyers and sellers significant money due to rescheduling movers and plans. Real estate agents can help buyers and sellers avoid this problem by discussing the new settlement procedures at the time of the listing.

• David DeSantis, partner and managing broker, TTR Sotheby’s International Realty:

Not all lenders may be ready for the changes come Oct. 3. So, making a good lender selection is more important than ever. Last-minute changes in appraisals would trigger the mandatory three-day review period. This could cause problems if the buyers have to move out of their current home ASAP or if they are making the purchase as part of a 1031 Exchange.

• Kevin Turner, broker, Home Towne Real Estate:

The required timelines are well-intentioned attempts to better protect and prepare buyers with consistent time frames and processes for receiving information about their loans. Prior to these changes, items like changes to the structure of the buyer’s loan or what they were paying could be simply handled with a variety of tools. Now all parties will have to ensure these types of things are monitored and addressed early enough so not to trigger the automatic review period.

[Closing time is about to get a big makeover]

• Taylor Bowen, broker/owner, Berkshire Hathaway Bowen Realty:

Buyers and sellers who seek a quick closing may find meeting deadlines a challenge. A last-minute change that could cause delays is when municipalities take a while to do final water bill readings. In these instances, title companies will generally put in a higher flat fee and then adjust as needed when the actual reading is recorded. This could result in new forms having to be issued and the parties waiting three days to close. Real estate agents will be called on to ensure that their clients are educated in these changes and make proper arrangements to account for possible delays.

[D.C. ranks 12th lowest in nation in closing costs]

• Rick Boswell, broker and owner, Century 21 Sterling Realty:

The purpose of these changes is to protect consumers and help them make more informed and intelligent decisions. As a result, conveniences like early move-in or having a loading van ready to go, have probably gone by the wayside. The new regulations will also localize housing transactions to a greater extent. Agents need to use local lenders to keep the process running smoothly. You can’t rely on people further away if you need immediate signatures.

 


About Brian Heafy

After a 30 year career in the information technology/professional services industry Brian began his second career as a real estate professional in 2012. Brian began his career in 1982 with the United States Marine Corps as a systems analyst providing software project management and implementation services to Marine Corps Aviation Logistics Squadrons in Iwakuni, Japan and later as a defense contractor assigned as lead technical program manager to the Navy Management Systems Support Office in San Diego. Brian went on to serve as technology manager for the City of Coral Springs, then joined a publicly traded government (ERP) software and professional services provider in Lake Mary, Florida as VP of the company's Public Safety & Justice Systems group where he and his teams supported over 450 small, medium and large Police, Fire, Courts and EMS agencies across the U.S. and Caribbean. Brian also served in technology management positions supporting commercial off the shelf software enterprise resource management systems finance and administration application software and public safety and justice systems application software projects for the City of Orlando and Orange County Clerk of Courts. Brian's in-depth understanding of governmental operations and contract management is a benefit to his real estate clients, so much of what gets accomplished in today's real estate industry deals with understanding government databases, brokerage disclosures, banking and governmental regulations each with their own set of established procedures - at all levels of government (local, county, state, federal). Brian holds a Bachelor’s degree in Business from Barry University. A Licensed Florida Real Estate Broker and member of the Greater Orlando Regional Realtors Association, member of the Marine Corps Association and former Web Sergeant for the United States Marine Corps League in Orlando, Florida. A native Floridian Brian and his wife Yoshiko have been married over 32 years and have two grown children.