The Consumer Financial Protection Bureau (CFPB) has recently issued a final rule setting the effective date of the “Know Before You Owe” mortgage disclosure rule to October 3, 2015. The new rules are formally known as TILA-RESPA, which stands for the Truth in Lending Act and the Real Estate Settlement Procedures Act. The rule requires user-friendly mortgage disclosure forms to be used that clearly outline the terms of a mortgage for a homebuyer.
The CFPB is an agency that was created as a result of the 2008 recession and the drastic increase of residential foreclosures across the United States. The purpose of the CFPB is to protect consumers. The new rules were originally scheduled to be effective in August, but the CFPB extended the effective date to October to allow more time for the affected parties to adjust.
It is predicted that the CFPB’s new rule will result in deals taking much longer, at least until all the parties involved get familiar with using them.
“The days of the 30-day close are pretty much over,” said John Linnington, of Cape May, president of The Title Company of Jersey. “Forty-five days would be about as fast as you could do it, and a more realistic time from contract to close is going to be about 60 days.”
Other changes include the requirement that a new form called a “Closing Disclosure” must be used. The purchaser of the property must receive this form a minimum of three business day prior to the scheduled closing date. The Closing Disclosure document combines and replaces two forms that were previously used.
The rules further require that the borrower receive a new official Loan Estimate. This form also streamlines two previously used forms. It must be provided to the borrower no more than three days after they formally apply for a mortgage loan.
According to the Mortgage Bankers Association website, “[t]ogether, these disclosures detail the consumer’s monthly payment, the costs of getting a mortgage, the costs to close and other pertinent information about the loan.”
If you have questions about the Know Before You Owe rules, please do not hesitate to contact us. During your free consultation, attorneys Bruce Levitt and Shelley Slafkes will carefully explain all of your legal options so you can make an informed decision about how to best proceed in your matter. Contact us today at 973-323-2953 to schedule a free initial consultation with a compassionate and knowledgeable lawyer.