The Consumer Financial Protection Bureau (CFPB) announced that new mortgage lending rules scheduled to take effect on Aug. 1 will be delayed until Oct. 1.
On Oct. 1, the CFPB will institute new rules regarding disclosures under the Truth in Lending Act and Real Estate Settlement Procedures Act that will affect all home builders, particularly those with a real estate lending arm.
Under the new procedures as a result of the Dodd Frank Act, four documents will be merged into two. The Good Faith Estimate and Truth in Lending disclosures will be eliminated and combined into a new single Loan Estimate form, or “LE.”
In addition, the final Truth in Lending Disclosure and HUD-1 Settlement Statement are being replaced by the Closing Disclosure, or “CD.”
What Do These Changes Mean?
Under the new rule, the biggest change is that the Closing Disclosure must be provided to the consumer a full three days prior to the closing, and if there are changes during that 72-hour period, the closing could be delayed.
Currently, the HUD-1 Settlement Statement can be presented to the buyer on the day of closing and any changes to the statement can take place during the loan closing.
In addition, the Loan Estimate must be delivered to the prospective buyer no later than three business days after receiving the application.
Changes Aimed at Helping Consumers
These new rules are intended to streamline the loan application process and make it easier for consumers to understand by clearly spelling out the most relevant details all on one page – the interest rate of the mortgage loan, the amount of the monthly payments and a listing of all the closing costs.
For consumers applying for adjustable rate mortgages, the documents will explain how their interest rate and future monthly payments could change based on certain factors.
During the rulemaking process, NAHB was actively involved by submitting comment letters, both individually and with coalition partners, urging the CFPB to ensure that any changes that would make it easier for consumers to understand and comply with the settlement process would not place any undue burdens on builders, lenders and other housing professionals.