What to Know Before Closing
The Loan Estimate: Today, borrowers receive two separate forms from their lender at the beginning of the transaction. This includes the Good Faith Estimate (GFE). Also, the initial disclosure required under the Truth-in-Lending Act (TILA). What about loan applications taken on or after October 1, 2015? The creditor will now use a combined Loan Estimate. This is now intended to replace the two previous forms. You must provide the new three-page Loan Estimate form to borrowers on a timetable similar to the current receipt of the GFE.
The Closing Disclosure: The combination of forms continues at the end of the transaction as well. This is with the HUD-1 Settlement Statement. Also, the final TILA forms now combined into a single Closing Disclosure form. This new five-page form is not only to disclose many terms and provisions of the loan. Also, the financial transaction of the closing of the sale.
Closings are now impacted by delivery rules of the new forms:
There is a part of the final rule creating these two new combined forms. The CFPB determined that borrowers would be better served by having a short time to review the new Closing Disclosure form. This is prior to signing their loan documents. As a result, in its rule, CFPB mandated borrowers have three days after receipt of the Closing Disclosure to review the form and its contents.
Note: The three-day review period starts upon the “receipt” of the form by the borrower. What about when some positive confirmation of the receipt of the form (i.e., hand delivery)? The form is then “deemed received” three days after the delivery process starts. As a result, the combination of the “delivery time period” and the “review time period” results in seven business days from mailing to loan signing. This excludes Sundays.
Title fees may need to be adjusted at closing and explained:
Both the new Loan Estimate and Closing Disclosure forms require any listing of settlement service. This involves title insurance or closing activities precede by the phrase “Title ”. This will allow the borrower to clearly see all charges in the same area.
Individual charges within each of these major groupings are alphabetically listed. Columns provide separate charges of the buyer, seller and other. As well as columns for both payments before and at closing.
Your clients will likely receive more than one Closing Disclosure:
The Buyer/Borrower will receive a Closing Disclosure several days before the closing. Also, likely a few days before a walkthrough on the property. Buyers/Borrowers will likely receive a new, adjusted Closing Disclosure at the showing.
Changes may not end there. CFPB mandates that changes in financial disclosure numbers in any amount must be re-disclosed. Also, including post-closing. For instance, changes in a recording fee.
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