Page 13 - John Hundley 2015

Sharp Thinking

No. 131 Perspectives on Developments in the Law from Sharp-Hundley, P.C. July 2015

New Disclosure Rule, Closing Procedures

Will Impact Real Estate Transactions

By Michael Olson, Michael@sharp-hundley.com, 618-242-0200

Big changes are in store for real estate brokers when the new mortgage rules, known as TILA-RESPA
Integrated Disclosure (TRID), take effect, probably on October 3, 2015.

By preparing for these changes now, agents will be better equipped to assist their
customers in navigating through these new regulations.
Background

Acting pursuant to Dodd-Frank Wall St. Reform & Consumer Protection Act (124
Stat. 1376), the Consumer Financial Protection Bureau (CFPB) last year published a
rule to reform mortgage disclosure procedures under the Truth In Lending Act, 15
U.S.C. § 1601 et seq. (TILA), and the Real Estate Settlement Procedures Act, 12
U.S.C. § 2603 (RESPA). The rule requires that new forms be used in subject
transactions. It was to have taken effect August 1, but late last month the CFPB
proposed to delay the effective date until October 3. Olson
New Forms

Home buyers likely will appreciate having fewer forms with which to deal. These new disclosure
forms, however, only apply to consumer mortgages and closed-end transactions. Currently, they do not
apply to cash transactions.

The first new form is the Loan Estimate, which combines the Good Faith Estimate and initial TILA
disclosure in an effort to avoid the confusion caused by having two separate forms discussing the loan
terms. The new form has all the information traditionally important to consumers in easy-to-understand
terms, including a breakdown of all related fees. Additionally, the lender has to show the services, such
as survey fees and title searches, for which consumers may shop around.
Once a lender has received an application from a home buyer, the Loan Estimate must be
placed in the mail to him or her within three business days. This strict time constraint placed on
lenders, coupled with the fact that all lenders must use the same Loan Estimate form, is intended to make
it easier for home buyers to shop between lenders and to compare rates.
The second new form is the Closing Disclosure, which replaces both the “HUD-1” settlement
statement and the final TILA disclosure. The Closing Disclosure and the Loan Estimate must be in
substantial agreement with one another on all major terms; previously, there was never a mechanism that
required the two disclosures to match up. The intent now is to ensure that consumers are not blindsided
by additional fees at closing. Therefore, certain charges, such as the lender’s fees or charges for
which the lender does not allow the home buyer to shop, cannot be increased on the Closing
Disclosure once they have been set by the Loan Estimate.

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●
Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
your particular situation, contact a Sharp-Hundley lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.