No procrastinating under new mortgage rules
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
If you are buying or refinancing, you need to know how to get it right when it comes to the mortgage settlement process overhaul that starts Oct. 3.
Known as TRID, the new rules originally were to start Aug. 1.
As I originally wrote back in June, gone are the Good Faith Estimate and the Truth-in-Lending Disclosure, being replaced by one, easier to comprehend three-page form named Loan Estimate or LE.
The mortgage broker or lender is obligated to send that to you within three business days after your application has been taken.
LE wording is intent to beat you over the head, encouraging you to shop around for settlement services. Realty companies and builders have made fortunes by steering folks to affiliated companies, making huge profits at the unsuspecting buyer’s expense.
The final Truth-in-Lending document and the HUD 1 settlement statement will be replaced by a five-page document named Closing Disclosure or CD.
The Closing Disclosure must be received three business days prior to consummation if it’s hand delivered. Add three business days if mailed.
Having three days to review all of the documents is consumer protection at its finest.
“Borrowers signed loan documents, and they were completely different than what the borrower believed,” said Mike Genest, sales manager at Lawyers Title, referring to the way borrowers were sometimes ripped-off when they were in a rush to sign and close.
You will also have an easier understanding of all the upfront costs and the long-term commitment for which you are responsible.
One helpful addition for you to consider on the Loan Estimate and Closing Disclosure is TIP, or the total amount of interest that you will pay over the loan term.
Just say no to procrastination once you make a deal with a seller. It can get complicated if you change loan programs or the APR changes by more than 0.125 percent. This triggers re-disclosure requirements and a new clock on the Loan Estimate and Closing Disclosure.
Mortgage Bankers President Dave Stevens said, “Do not delay your home inspection. Get your contingencies cleared well in advance of your final inspection. Get your conditions in to your lender for a full loan approval 10 to 14 days before closing.”
Be patient with your real estate professionals as this is a sea change in work process flow.
Write your sales contract for at least a 45-day escrow period for the next three months. Just like the last major change to the Good Faith Estimate in 2010, it became business as usual once everyone got used to the changes.
You can learn more by clicking on the “Know Before You Owe” links at either mba.org or cfpb.gov.
Jeff Lazerson - Mortgage Columnist since 2011