What Realtors Need to Know About the New CFPB Regulations

What Realtors Need to Know About the New CFPB Regulations

Recently, the Consumer Financial Protection Bureau (“CFPB”) announced that it was delaying the implementation of the TILA-RESPA Integrated Disclosure rule (“TRID”).

TRID — also known as the “Know Before You Owe” rule — requires mortgage lenders to provide two new documents to consumers applying for a mortgage loan: a Loan Estimate form and a Closing Disclosure form.

Generally, former documents used for mortgage loan transactions per both RESPA and TILA will no longer be used in favor of fewer forms intended to provide necessary disclosures to consumers in a way they can understand. The new forms include:

Loan Estimate — replaces the Good Faith Estimate (RESPA) and the early Truth-in-Lending disclosure (TILA), and includes new disclosures required under Dodd-Frank. It must be provided to mortgage loan applicants within three days following the submission of an application.

The Loan Estimate provides the borrower with detailed information on the key terms of the loan, projected payments over the life of the loan and a breakdown of the closing costs. It also provides information on the borrower’s total payments over a five-year period as well as the APR and total interest percentage over the life of the loan.

A Loan Estimate is not required for:

• Commercial property loans
• Reverse mortgage loans
• Home equity loans
• Mortgage loans secured by an unattached mobile home
• Mortgage loans originated by lenders of five or fewer mortgages annually

Closing Disclosure — replaces the HUD-1 (RESPA) and revised Truth-in-Lending disclosure (TILA) and includes new disclosures required under Dodd-Frank. It is a detailed account of the settlement transaction and must be provided within at least three business days before closing.

The Closing Disclosure includes information on the loan terms, projected payments, closing costs, loan costs, a calculation of cash to close, a detailed line-item summary of the loan transaction and additional information, including disclosures on:

• Assumption
• Demand feature
• Late payment penalties
• Negative amortization
• Partial payment terms
• Escrow account

The new law is effective as of October 3, 2015, although the CFPB has provided an unspecified grace period to lenders –at least through the end of 2015 — for its implementation.

Jurado & Farshchian, P.L. assists both buyers and sellers and their agents with real estate transactions and questions. Please call one of our experienced attorneys at (305) 921-0440, or email us at info@jflawfirm.com today.

 

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