New Rules Affecting Buyers and Sellers of Real Estate
Are you currently selling your home or shopping for a new one? If so, you should be aware that the CFPB (Consumer Fraud Protection Bureau) has new rules that go into effect on August 1, 2015! These rules apply to all “closed- end consumer credit transactions secured by real property”, meaning purchase money mortgages, refinances, timeshares, construction only loans and parcels 25 acres or less. The sale and purchase of vacant land, which was previously considered a commercial transaction, is also subject to the new rules. Home Equity Lines of Credit, reverse mortgages, mobile home loans, commercial transactions and private lenders originating less than 5 loans per year (e.g., Articles of Agreement) are exempt from the new rules and forms.
What this means for most buyers and sellers is to anticipate delays in the mortgage and closing process. You will no longer see a HUD-1 Settlement Statement, Good Faith Estimate or Truth in Lending disclosure. Instead you will see a new Loan Estimate and Closing Disclosure, which presents information in an entirely new format. These new documents have specific delivery deadlines, as long as six business days, that will change the current local practice of sharing information between lenders, attorneys, title companies and borrowers. Certain changes to those documents after delivery will require additional waiting periods and potentially delayed closings.
If you are familiar with the process of buying or selling a home, then you know that it can often be fraught with frustrations and delays, with all parties feeling like closing is at the mercy of the lender. Unfortunately, the CFPB changes are expected to cause additional delays as the parties involved ensure their compliance and work to develop new standards of practice. Be assured that we are ready to guide our clients through the new process and prepared to ensure a timely closing. Still, depending on your circumstances, you may want to give special consideration to solidifying a contract in June or July!