New disclosures created by the CFPB (Consumer Financial Protection Bureau) are set to go into effect on August 1, 2015. In my opinion, the new disclosures will be a huge improvement compared to the Good Faith Estimate that HUD created in 2010. At least the new disclosures will show the total payments due…and of course, they’re not perfect either. I’ll address the new forms on another post.
The new disclosures also have new wait time periods that will go into effect with the new disclosures that will be required on new applications effective August 1, 2015. Probably the biggest change will be the three day wait period takes place after the borrower receives the new Closing Disclosure (this will replace the HUD-1 Settlement Statement). The borrower must receive the initial Closing Disclosure at least three days (Sundays and federal holidays are not counted as one of the days) prior to signing their loan documents. If there are changes that need to be made to the Closing Disclosure that impacts the APR, changes to the loan product or if a prepayment penalty is added, a new disclosure may be required to be issued and may trigger another three day delay.
By the way, if you’re refinancing, the three day wait period prior to signing is in addition to the three day right of rescission that takes place after signing on primary or second homes. You can probably plan on longer lock periods or locking later in the transaction and risking rate changes effective August 2015.
Other wait periods exist throughout the transaction as well, associated with the initial Loan Estimate (which will replace the Good Faith Estimate and Federal Truth in Lending). The wait periods triggered when issuing the Loan Estimate are pretty much the same as what we currently have with the Good Faith Estimate, including when a Loan Estimate is re-issued because of a bona-fide “changed circumstance”.
The closing timeline example that the CFPB uses for an example has a purchase transaction beginning August 3, 2015 and not closing until October 29, 2015…a three month closing! Now, I don’t think it’s going to take three months to close a transaction once the new disclosures are required in August…I do believe that we are going to see delays with closings…especially in the beginning while the entire real estate industry adjusts to these new requirements.
So… if you want a 30 day closing this summer, you need to either sell or buy your home prior to this August. Bottom line, as much as we all prepare for the upcoming changes, it’s going to be a bumpy road for a while.
[…] It appears this administrative error will give us two more months until we need to switch to the new disclosure forms…which, in my opinion, seems improved over the 2010 Good Faith Estimate (what isn’t?). During this busy of a market, this is good news for all those who are trying to quickly close purchase transactions as, regardless of how wonderful the new disclosures are, it will take time to adjust. […]