New Loan Estimates and Closing Disclosures: Prepared?
August 4, 2015
It's going to be messy. It's going to take a while before the wrinkles are smoothed out. Closings may get delayed. Buyers and sellers might get unhappy. Even though the new system for closing on a real estate purchase that involves financing is designed to make life easier for the consumer, the myriad of issues has pushed back the start date until October 1st. The HUD-1 may have bought some time but its demise is getting closer. Be prepared!
It's new! It's exciting! What is it? The Consumer Financial Protection Bureau has reworked the loan estimate a consumer will receive to aid them in understanding their loan terms, including loan amount and interest rate, projected payments and costs at closing, among other things. For a lender to provide a loan estimate, the lender will need (1) the consumer's name; (2) Social Security Number; the consumer's income; (4) legal description on the property selected; (5) the projected sales price; and, (6) the loan amount. The consumer must provide for a complete application. Upon receipt of the loan application, a lender will usually have three days to provide the Loan Estimate to the consumer. Saturday is considered a business day if the lender has lobby hours on Saturday; otherwise, Saturday is not a business day for calculating the delivery of the Loan Estimate.
The Closing Disclosure replaces the HUD-1 and Truth-in-Lending disclosures. The Closing Disclosure consists of 5 pages, in which only some will be provided to the seller while all will be provided to the Consumer (formerly known as "the buyer"). Delivery of the Closing Disclosure must occur 3 days before consummation of the loan. Here, Saturday is always a business day no matter what. If it's being sent via postal service then you will need to send it 6 days in advance.
The process is going to take some time before all parties get used to it. Unfortunately, everyone expects some serious hiccups in the meantime. The best way to avoid a delay is to communicate with your closing agent quickly and often and to provide all required information as soon as possible.