I came across a reputable video produced by the National Association of Realtors™ explaining the new closing and disclosure rules for mortgage transactions. I wanted to pass this along to you because you are in or have expressed an interest in real estate. You can access the video here.
Here are some key points made in the NAR video:
Here are some key points made in the NAR video:
1. The old “Truth In Lending” and “Good Faith Estimate” are now replaced by the new “Loan Estimate” (3 pages), which must be provided to a borrower within 3 business days after application.
2. The “HUD-1 Settlement Statement” is now replaced by the “Closing Disclosure” (5 pages), which must be received by the borrower 3 business days PRIOR to closing.
3. Transaction closing time will take longer, so add about 2 weeks to the time line. Simultaneous or back-to-back closings will be difficult. Complete the negotiations and schedule final walk-throughs several days before closing.
4. Must re-submit a closing disclosure and wait another 3 business days, if interest rate increases more than by 0.125% for fixed rates or 0.25% for adjustable rate, changing loan type (i.e., fixed to adjustable or vice versa), choosing a new pre-payment penalty option. Minor changes to the Closing Disclosure, not objected to by the borrower, can be corrected at closing or up to 30 days post closing.
5. Borrowers’ Closing Disclosures are to be prepared by the lender, not closing agent, because the lenders have full liability for the disclosures and its delivery to the borrower. Closing agents will still prepare the Closing Disclosure for sellers.
6. These new rules do not apply to all-cash transactions, commercial transactions, reverse mortgages, or residential investment property transactions (non-owner occupied properties).
7. Lenders will need to for refund borrowers for discrepancies between Loan Estimate and the Closing Disclosure for fees associated with lender fees (origination fees, discount points, processing, etc.) and discrepancies could be a source of lawsuits by borrowers.
8. New rules will not affect Realtor fees or commission disclosure.
9. Small lenders may have the closing agent prepare the Closing Document.
10. New rules apply to lenders who provide owner occupied 1-4 family residential mortgages. Small lenders making less than 5 loans per year are not covered under the new rules.
11. Sellers providing financing for more than 5 transactions per year ARE covered by the new rules.
2. The “HUD-1 Settlement Statement” is now replaced by the “Closing Disclosure” (5 pages), which must be received by the borrower 3 business days PRIOR to closing.
3. Transaction closing time will take longer, so add about 2 weeks to the time line. Simultaneous or back-to-back closings will be difficult. Complete the negotiations and schedule final walk-throughs several days before closing.
4. Must re-submit a closing disclosure and wait another 3 business days, if interest rate increases more than by 0.125% for fixed rates or 0.25% for adjustable rate, changing loan type (i.e., fixed to adjustable or vice versa), choosing a new pre-payment penalty option. Minor changes to the Closing Disclosure, not objected to by the borrower, can be corrected at closing or up to 30 days post closing.
5. Borrowers’ Closing Disclosures are to be prepared by the lender, not closing agent, because the lenders have full liability for the disclosures and its delivery to the borrower. Closing agents will still prepare the Closing Disclosure for sellers.
6. These new rules do not apply to all-cash transactions, commercial transactions, reverse mortgages, or residential investment property transactions (non-owner occupied properties).
7. Lenders will need to for refund borrowers for discrepancies between Loan Estimate and the Closing Disclosure for fees associated with lender fees (origination fees, discount points, processing, etc.) and discrepancies could be a source of lawsuits by borrowers.
8. New rules will not affect Realtor fees or commission disclosure.
9. Small lenders may have the closing agent prepare the Closing Document.
10. New rules apply to lenders who provide owner occupied 1-4 family residential mortgages. Small lenders making less than 5 loans per year are not covered under the new rules.
11. Sellers providing financing for more than 5 transactions per year ARE covered by the new rules.