October 20th, 2015 9:24 AM by Jackie A. Graves, President
New disclosure rules went into effect in the mortgage world
Saturday that require lenders to provide home buyers two new forms that clearly
detail their loan terms.
consumers, it's going to be viewed as an improvement in what can be a somewhat
scary and intimidating process in the biggest investment of their life,"
said David Stevens, CEO of the Mortgage Bankers Association.
The rule, formally known as the TILA-RESPA Integrated Disclosure
rule, reduces what used to be four forms from two different government agencies
to two forms: the Loan Estimate and Closing Disclosure.
Here's what buyers can expect:
Comparing different loans
have to provide potential home buyers a Loan
Estimate form within
three days of a submitted application.
The three-page form details the terms of a potential loan
including: amount, interest rate and whether the figures can change after
Related: Are you ready to be a homeowner?
Clearly breaking out these figures should make it easier to
compare loans from different lenders (yes, you should shop around) to find the
best rate and terms. Be sure to pay attention to whether the interest rate is
fixed or adjustable and any potential future penalties you could face.
The form will also breakdown estimated closing costs.
What you saw is what you bring to closing
must provide the Closing
Disclosure form three
days before the closing date to allow the buyer to make sure the loan terms
The first page of the Closing Disclosure mimics the Loan Estimate
form to make it easier to verify that the loan amount, interest rates, monthly
payments and other costs haven't changed since that initial estimate.
"Make sure that first table [on the forms] match," said John
Henson, chief compliance officer at Lending Tree. "You are stuck with that
for the rest of your life. Make sure you can afford what you sign up for."
If any amounts have changed significantly, be sure to ask why.
Related: How much of your budget should go to
Henson added that buyers should also pay close attention to the
monthly payment figures that include mortgage insurance and estimated escrow
costs along with the cash expected at close.
With the disclosure, "You don't run into the situation where
a buyer doesn't know how much money to bring," he said.
No more 'Parking lot' deals
borrowers must have the Closing Disclosure three days before closing, the deal
can't change at the last minute.
This requirement could take some time for lenders to adjust to and
could delay some closings. "The industry is used to getting things done at
the last minute," said Stevens.
That means any inspections, repairs and contingencies need to be
taken care of earlier in the process.
"There will be buyers and sellers that will be shocked they
can't make an adjustment to their contract three days before their
settlement," said Bob Davis, executive vice president at American Bankers
Association. "Some deals will likely be delayed due to the re-disclosure
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