Significant changes in real estate lending are taking place on August 1, 2015. The purpose of these changes is to help consumers better understand mortgages and disclosures, as well as make it easier to compare loans. Your Bryan real estate attorney can help you with any questions you have, but an overview of these changes follows.
Integration of RESPA and TILA
The Real Estate Settlement Procedures Act and Truth in Lending Act will be merged into one on August 1, in essence ending HUD-1. The Consumer Financial Protection Bureau determined that this was necessary in order for consumers to better understand the closing process. Two new forms are being introduced with the initiation of these changes:
- Loan Estimate: This document puts into one place the Initial Truth in Lending disclosure and Good Faith Estimate, and should be given to the borrower within three days of the loan application. You will find in this document an explanation of the key terms used in lending, along with an estimate of the lending and closing costs of your loan.
- Closing Disclosure: This eliminates the final Truth in Lending disclosure as well as HUD-1. At least three business days before the closing of your loan you should receive this document, which will detail the entire transaction of the property in question. This is different from HUD-1 in that each charge is detailed separately, which helps you to understand exactly what you are paying for.
The Closing Disclosure
The closing disclosure can be given to the borrower either by the lender or closing agent, but ultimately it is the lender who is liable for any errors that are made. When a loan is about to close, a three-day disclosure period is triggered. The loan cannot close until the end of the third business day. Certain changes can be made to the Closing Disclosure during this time provided that the corrected form is given to the borrower no less than one day before the loan is to close. However, certain changes require that another three-day disclosure period occur. These are:
- A change in the annual percentage rate of the loan that is more than 1/8 %
- The lender adds a prepayment penalty to the terms of the loan
- The loan type changes (For instance, the loan is an adjustable-rate, but is changed to a fixed-rate)
It is worth noting that if you apply for a loan before August 1, these new rules and disclosures do not apply.
For Legal Assistance with a Real Estate Transaction
A Bryan real estate attorney can help ensure that all aspects of your real estate purchase are performed properly. This is especially important when large transactions occur. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.