New RESPA - TILA Integrated Disclosures
are scheduled to become effective August 1 for financed real estate transactions...

Integrated Disclosures are part of the Consumer Financial Protection Bureau's (CFPB) ongoing efforts to increase consumer awareness about mortgage financing.

While Realtors� won't be involved with direct compliance, they can be indirectly affected by the new rules and mandatory waiting periods. Now more than ever, we'll want to think a step or two ahead so we can act in our clients' best interests.

They just won't have as much effect on you and your buyer as recent hype may be leading you to believe.

Without good communication between all parties, the new Integrated Disclosures DO have the potential to delay your closing date beyond the one agreed to in your contract, though

they don't have to.

Let's start with a brief overview -

RESPA is the Real Estate Settlement Procedures Act which governs the actions of most everyone associated with a real estate transaction. This includes the lender, Realtor�, title company or closing attorney, insurance agency, appraiser, inspector, and surveyor.

TILA is the Truth In Lending Act which protects consumers' interests and rights in financed transactions such as mortgages, car loans, credit card accounts, and any other transaction where credit is extended to an individual.

Both of these Federal laws are now administered and enforced by the Consumer Financial Protection Bureau.

On August 1 of this year, changes are scheduled to take place in the application of both RESPA and TILA to financed residential real estate transactions.

On all-cash deals the closing title company or attorney's office will still use the familiar HUD-1 Settlement Statement.

The main changes Realtors� will see are in the forms used, and their State license numbers and contact info being included on the Closing Disclosure.

The new forms will give buyers more information about their financed transaction in an easier-to-read format. The timing of the initial disclosures (within 3 days of full application) remains the same, while there is a new advance notice requirement for buyers' receipt of the closing documents.

Additionally, there are new disclosure timing rules pertaining to Changed Circumstances that occur between application and closing. These are what could most affect closing timing.

Here are the form changes:

Initial TIL

(Truth In Lending Disclosure)

becomes part of

Loan Estimate

sent to buyer within 3 days of full application

GFE

(Good Faith

Estimate)

becomes part of

Loan Estimate

sent to buyer within 3 days of full application

click HERE for an example of the Loan Estimate

Final TIL becomes part of Closing Disclosure received by buyer at least 3 days before closing
HUD-1 Settlement Statement becomes part of Closing Disclosure received by buyer at least 3 days before closing

click HERE for an example of the Closing Disclosure

Both examples are directly from the CFPB

Most of the compliance responsibility will fall on lenders and title companies/closing attorneys.

Preparation of the new Loan Estimate is now the lender's responsibility, though accurate input from the settlement agent is also required. Early communication and cooperation between them will lead to on-time closings.

Because variances (fee and cost changes) between the Loan Estimate and Closing Disclosure are limited by law, accurate initial disclosures are mandatory.

This is where those Changed Circumstances can come in and delay your closing if the Loan Originator isn't paying attention every step of the way.

Changed Circumstances are issues specific to the buyer or transaction that were or become

unknown - inaccurate - new - changed

from the initial Loan Estimate disclosure that was given to the buyer, and cause the costs previously disclosed to change.

Lenders are required to reissue modified Loan Estimates whenever valid Changed Circumstances have a bearing on buyer qualifying or transaction costs.

So what might cause a Changed Circumstance?

- Buyer/borrower's income, assets, or debts are not

as initially presented at PreApproval or application

- Buyer decides to lock loan interest rate after receiving

initial Loan Estimate, and available rate is now higher

than disclosed on LE

- Appraisal comes in lower than contract price, changing

Loan-to-Value ratio (LTV) and requiring Mortgage

Insurance or increasing the interest rate.

- Home inspection reveals an issue which seller will

address through a price reduction or contribution

to closing costs

- Buyer decides to use a different settlement agent or

insurance agency, changing the closing costs and

escrow amounts on the initial LE

Each set of Changed Circumstances requires its own revised Loan Estimate, along with a new mandatory 3-day delivery and waiting period. If re-disclosures are required and your closing date is coming up soon, extensions may be needed.

Protect yourself and your closing timeline by having a trained, responsible, and accountable Loan Originator contribute to your deal.

Let me handle the details, timing, and compliance matters

while you take care of your buyers and sellers.

When buyers who want to use financing are properly PreApproved, then guided all the way to closing, Changed Circumstances are minimized and even eliminated.

Integrated Disclosures don't have to delay or stop your deals. I still suggest submitting contracts with 30-day Financing Contingencies and 38-day closings from effective dates for conventional financing, as long as your buyer can provide requested paperwork in a timely manner.

Call me when your buyers first start looking. When they know what to expect and have the information they need, there's no reason not to hit your contract dates and arrive on time at the closing table.

Let me reinforce the trust

your buyer has placed in you! sm