What REALTORS Should Know About CFPB Changes Courtesy of:
CFPB was formed as a result of Dodd-Frank in 2010 CFPB governs all matters consumer finance related CFPB now oversees RESPA CFPB regulates: Credit Cards Mortgages Bank Accounts & Services Credit Reporting Money Transfers Debt Collection..and more
These changes are NOT recommendations/requirements of NAR/ARA However it is important to note that NAR was vital in obtaining the 60-day grace period (extension) from August 1 to October 3, 2015
Close-ended loans not subject to the new rule Reverse Mortgages Home Equity Line of Credit (HELOCs) Chattel-dwelling/Mobile Home-only loans Creditors who originate less than 5 loans in a calendar year
The Loan Estimate (LE) 3 pages Replaces early TIL statement and GFE Summarizes key loan terms and estimates of loan and closing costs Promotes comparison shopping The Closing Disclosure (CD) 5 pages Replaces final TIL statement and HUD-1 settlement statement Will be received by consumers three business days before consummation
This new change will take effect October 3, 2015
To provide easier-to-use mortgage disclosure forms To improve consumer understanding To aid in comparison shopping To prevent surprises at the closing table
TOP 10 THINGS REALTORS Should Know About CFPB Changes
A new closing statement form called the Closing Disclosure (CD) will be used for most loan applications taken for new mortgages, currently proposed as effective on October 3, 2015. The lender, not the closing agent, may be preparing and delivering the CD.
The CD must be delivered to the buyer/consumer at least three business days prior to the scheduled closing date.
Closing agent must get information to the lender approximately 10 to 14 days prior to the closing date for completion of CD to meet the delivery requirement. You will need to communicate to the closing agent all your buyer paid charges 10 to 14 days prior to the closing date. How will you handle this communication?
The closing agent will need your Broker s AREC license number AND your individual AREC license number for the new CD.
The CD sent to the buyer/consumer won t include the seller s side of the transaction. The closing agent (not the lender) is responsible for completing and delivering the seller s side of the CD. The closing agent may decide to prepare a separate CD for the seller.
You likely will not receive an advance copy of the CD before it s delivered to the buyer/consumer. The lender will likely send the CD to the closing agent when it s sent to the buyer/consumer. The settlement agent will not be permitted to send a copy to real estate agents; you will need to obtain a copy from the borrower.
Broker Responsibility for Real Estate Closing Procedure Arkansas Real Estate Commission Regulation 10.4(d)(2) Commission Regulations are Limited by Statutory Authority A Regulation cannot place a greater burden on Broker than the Law allows Arkansas Code Annotated 17-42-316 defines Licensee s duties as: Use reasonable efforts to further the interest of the client Exercise reasonable skill and care in representing the client and carrying out the responsibilities of the agency relationship To place an expectation on a real estate licensee to act in any manner in conflict with or counter to a rule prescribed by the Consumer Finance Protection Bureau (CFPB) would be beyond reasonable and therefore beyond the statutory authority of the Real Estate Commission.
Changes to the CD after delivery to the buyer/consumer MAY trigger a new three-day waiting period if changes cause the Annual Percentage Rate to be inaccurate, the buyer changes loan product or a prepayment penalty is added. Changes and adjustments affecting the value of the property (as determined by the lender) may trigger additional disclosure and review periods under the Equal Credit Opportunity Act (ECOA) controlling the delivery of the appraisals. You may want to consider two pre-settlement inspections or walk throughs (e.g. first inspection 7 to 10 days in advance of closing and a second inspection on the day of the closing).
Review and become familiar with the CD so that you can answer buyer and seller questions. Note the CD refers to Owner s Title Insurance as optional in some circumstances. Obtain appropriate advice for the buyer/consumer on the protections given to them through owner s title insurance.
The new TRID rules may affect the contract terms that you help negotiate for either the buyer or the seller. For example, a closing 30 days out may no longer be realistic. If your contract form contains a set number of days for the closing to occur, then a minimum of 15 additional days may be advisable. If your contract form requires you to fill in a specific date, take additional time into consideration. It s important for you to communicate with the lender and the closing agent to determine a realistic timeframe for closings under these new rules.
What system do you have in place to communicate changes to the contract (after it s been signed) to the lender? Consider having a conversation with buyers about their need to respond immediately to lender requests and remind the seller they must follow the contract to the letter because not doing so may delay the closing.
Consumer Financial Protection Bureau (CFPB) TILA/RESPA Integrated Disclosure (TRID) TILA & GFE are now Loan Estimate (LE) HUD-1 is now Closing Disclosure (CD)
Lender/Loan Originator is now Creditor Borrower is now Consumer Closing/Settlement is now Consummation Consummation is defined as: time of debt obligation
Notable fines include: Ally Bank $80 Million JP Morgan Chase $309 Million American Express $59 Million Remember that the CFPB oversees RESPA. It is possible for the CFPB to reach outside of the banking and lending environment for fines and penalties.
Encourage your buyer to consult with their Creditor and work timely to fulfill requests Add two to four weeks out for your closing date Order appraisals immediately following acceptance of the offer Explanation of the closing documents will be given to the consumer by either the lender or the title company, but will NOT be shared with the REALTOR
What REALTORS Should Know About CFPB Changes Courtesy of: