New Lending Rules Delay Real Estate Closings

As of October 3rd, there is a new Federal rule (the TILA-RESPA Integrated Disclosure rule) that governs lenders who make mortgage loans to consumers. The old rule required lenders to give 3 loan disclosures to home buyers–the Good Faith Estimate (GFE), the Truth in Lending (TIL) and the Settlement Statement (HUD). The Feds thought these three were confusing to borrowers and have replaced them with two new disclosures. The new rule also requires all lenders to use the same loan application and disclosure form called a Loan Estimate form. The idea is that buyers can more easily compare lenders’ rates and fees. The second one is the Closing Disclosure, which replaces the Settlement Statement (HUD).  These new disclosures require new processes.

Title companies used to prepare these statements and deliver them to buyers and their agents prior to closing for their review, but now the lender is responsible for the compliance and delivery of these disclosures. The lender must provide the Closing Disclosure at least three business days prior to closing, now called the loan consummation.  The timeline for this rule counts Saturdays as a business day, but not Sundays and Federal holidays.  No changes can be made to the Closing Disclosure during that three day period. If a change is required, the three day timeline starts over. This is the part where patience may play a big role as there will no doubt be unexpected delays when changes are made. Lenders may still ask title companies to prepare and send the Closing Disclosures to their clients and continue to perform the Loan Consummation. (closing)

Another change is that your real estate agent will have to get permission from their client in writing on a promulgated form for the lender or the title company to release any information to them. We will provide these forms to our clients when we prepare our representation agreements.

What do these changes mean for our clients? The entire process is going to take longer.  Financing and closing a home used to take 30-45 days. Now, we expect it to take 45-60 days from contract until to consummation to close a loan.  We can, however, recommend a number of excellent (and honest!) lenders who can provide the proper disclosures and get loans closed in the most timely manner possible. The learning curve will be steep for all parties, so working with a highly experienced lender will be important.

Posted by Laura Duggan and Katy Freshour, West Austin Properties, 3312 River Road, Austin, TX 78703, 512-750-2425 (Laura), laura@westaustin.com, 512-826-4310 (Katy), katyfreshour@gmail.com