Residential Mortgage Changes Coming October, 3, 2015

Important information for our clients. PLEASE be aware of these changes if you are buying, selling or refinancing a residential mortgage, primary residence. Does not pertain to investment properties in an LLC or properties of over four units, commercial mortgages, mobile homes not secured to foundations/land, reverse mortgages, and equity home loans. These are the main exemptions for the new regulations. ALWAYS check with your lender!

NEW Government regulations take effect October 3^rd, 2015. These changes effect closing procedures, disclosure forms/time frames and forms from both the lender and title company. Below is a general re-cap of the major features.

The new up-front form is now called the “Loan Estimate”. It replaces the TIL (Truth in lending form).

The “Closing Disclosure” replaces the HUD form.

Closings/settlements will now be call a “Consummation”

Lenders and title companies have been preparing for these changes for over a year and it has been costly and time consuming. The penalties to them for non-compliance are VERY steep. Smaller lenders and title companies will have difficulty complying with these new regulations simply because they do not have the financial resources or the staff to be compliant. Some will get out of the business, some will merge and others will simply close up or stop doing residential mortgages lending or closings.

The new forms and procedures were meant to provide the consumer with more information and time to make the proper mortgage decision. Initially, the forms and procedures will create confusion and closing/consummation delays.

Suggestions/tips:

Buying or selling a home – no more 30 day realtor contracts are recommended – at least for the first few months of the new regulations. A couple seminars I have been to suggest 45 to 60 day Agreement of Sale Contracts. This will provide additional time for lenders to comply with the new guidelines and forms.

Selling/Buying vs. refinancing. If a closing/consummation is delayed it will be delayed on average of 3 to 10 days. So a refinance may be postponed and one will not get their money or payoff a loan for an additional period of time – yes an inconvenience. BUT a Sale/Purchase is different. Suppose you sell your home in the morning and all goes well. You then take your proceeds to the new purchase in the afternoon – a common happening. Should that closing not take place, for any of a number of reasons, you now have no home to move into, or go back to, and your possessions are on a moving truck – and you will be staying in a hotel, with family or friends, for several days The industry was told that this will happen.

Pick ONLY veteran/seasoned loan originators who work for local banks or mortgage companies. There are a LOT of new compliance regulations regarding disclosures as to when a lender starts the clock on a new application. You can reach out to them locally or visit their office – a big advantage if issues arise.

The same goes for Title Insurance Companies – your Lender is more suited to choose the best title company as they deal with them on a regular basis. There is much more interaction from the lender with the title company than there will be from the realtors, under the new guidelines.

Constantly keep in touch with your lender/originator for updates on your purchase. Regarding the Sale of your home, keep in Constant touch with your buyer to make sure all is OK with their lender.

Lenders bear the most responsibility under these new guidelines. The mortgage originators and realtors are the facilitators.

I would use ONLY experienced Real Estate attorneys – the ones who specialize in this type of legal work.

Be PRO-ACTIVE with all parties involved. Make them give you assurances in writing by e-mail throughout the process that all is well and make sure they get the package to the title companies timely. This is critical.

Dennis Dovie | 10/03/2015

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Residential Mortgage Changes Coming October, 3, 2015