Home buyers should familiarize themselves with the latest mortgage disclosure rule that went into effect October 3.
Know Before You Owe Mortgage Disclosure Rule
The rule, also known as The Truth in Lending Act and Real Estate Settlement Procedure Act Integrated Disclosure rule or TILA-RESPA Integrated Disclosure rule, requires easier-to-use mortgage disclosure forms so that borrowers will understand more clearly what they are signing as they enter into this type of contractual bond.
The reason this rule was set into place was to make the mortgage process easier on consumers buying Boca Raton luxury homes, Coral Springs homes for sale, or other such properties by replacing 4 disclosure forms with two new ones. The goal was to make the new forms easier to follow, understand and use.
The two new forms are the Loan Estimate and the Closing Disclosure.
- The Loan Estimate: This form outlines the loan terms including the loan amount, interest rate, monthly principal and interest totals, as well as a prepayment penalty and balloon payment, if the latter two apply. It also lists the projected payments for the first 7 years and the remaining years of the loan up to 30 years. Closing cost details are broken down so borrowers will know how much to expect to pay at the property’s closing and what these monies are paying for. It is recommended that borrowers save their Loan Estimate form and take the time to compare it with the Closing Disclosure when it is presented.
- The Closing Disclosure: This form must be presented to the buyer at least 3 business days prior to closing. It should show the final loan terms and closing costs. It is considered a statement, so buyers need to carefully examine it and compare this document with the Loan Estimate to ensure there are no discrepancies. If any of the information is different, buyers should bring these items to the attention of the mortgage lender immediately to minimize any delay in closing.
Consumer Financial Protection Bureau (CFPB)
The “Know Before You Owe” Mortgage Disclosure Rule was instituted by the Consumer Financial Protection Bureau (CFPB), which is designed to help the consumer finance markets. This latest update is an attempt to make the mortgage process more consistent and fair for the buying parties. The CFPB aims to empower the buying public by assisting them in taking more control over their economic lives with better knowledge.
Expectations and Goals
As with any new rule, the real estate industry is expecting to have some glitches and hiccups. The CFPB has dedicated substantial resources to assist everyone involved with understanding the new requirements. Systems will need to be adapted and personnel trained in new procedures.
The real estate market is likely to find issues and may have additional questions as these new forms take effect and are used in practice when closing on Boca Raton luxury homes, Coral Springs homes for sale, and other similar locations. Patience will be key for all parties involved.
National Association of REALTORS® (NAR) President Chris Polychron commented that even though a lot of hard work has been put in place to make this new industry change as seamless as possible, everyone should expect some challenges. He recommends that extra time be set aside for closings and communication lines to be kept wide open between all the parties involved.
