June 19th, 2015 9:06 AM by Jackie A. Graves, President
On August 1, 2015, loan documents to homebuyers
are going to be simpler and easier to understand. Two new forms, a Loan
Estimate and a Closing Disclosure, will replace the HUD-1 Settlement Statement,
the Good Faith Estimate, and the Truth-in-Lending disclosure form.
The purpose of the new forms is
to simplify closing information and make it simpler for consumers to compare
their estimated costs to final costs.
Created by the Consumer
Financial Protection Bureau with
input from consumers and industry groups such as the NAR, the new forms will
hold lenders to three-day deadlines so that consumers will have the information
they need well before closing.
The three-day rule applies to
both the Loan Estimate and the Closing Disclosure. Buyers should receive the
former three days after applying for a loan and the latter three days before
closing. Buyers should take this time to look carefully for any changes between
the Loan Estimate and the Closing Disclosure.
Consumers will have a more
transparent experience, including less obfuscating jargon and greater clarity
concerning closing costs. On the new forms, the interest rate, monthly
payments, and the total closing costs will be clearly presented on the first
page, making it easier to compare mortgage loans and choose the one that is
right for them.
Important information will also
be highlighted, including the costs of taxes and insurance and how interest
rates and payments may change in the future. This information will help
consumers decide whether they can afford the mortgage loan and the home, now
and in the future.
The new forms also warn
consumers about features they may want to avoid, like penalties for paying off
the loan early or increases to the mortgage loan balance even if payments are
made on time.
Consumers will appreciate that
the first pages of the new Loan Estimate and the new Closing Disclosure look
the same, so they can more easily compare costs. If discrepancies are found,
consumers can contact their real estate agents or their lenders for more
Written by Blanche Evans – To
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