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New rules help clear up loan confusion

Roach

New government requlations that went into effect last week implemented what the president of the Mortgage Bankers Association called “the single largest implementation challenge that the broad industry has faced” since the Dodd-Frank Wall Street Reform and Consumer Protection Act was adopted in 2010.

The new rules revise procedures to require mortgage lenders to be more transparent and fully disclose all fees and terms in mortgage agreements to customers.

Sounds good, right?

But, as with any new government regulation, there are some positives and some negatives.

On the positive side, borrowers will now be able to look at the terms of a final loan agreement and compare the numbers with what the lender initially disclosed. Borrowers will receive a new form called the loan estimate in a minimum of three days after filing a loan application.

Borrowers will get a new closing cost disclosure form called a loan estimate that will be easier to understand and holds lenders responsible for any changes after the closing.

Under the new rules, lenders will not be able to change any fees that were disclosed in the initial loan estimate and are paid to the lender. The old forms were confusing and lenders had leeway to change their fees prior to closing.

Three days prior to closing, borrowers will receive a form called a closing disclosure. The new disclosure will confirm the mortgage loan’s terms and costs to the borrower. It will also inform the buyer how much money they need to bring to closing. This is a benefit for the borrower because it will give a buyer time to compare the final mortgage costs to what was in the initial loan estimate.

If there are any changes because of circumstances out of the lenders’ control, such as because of a repair that is needed because of an inspection issue, a new three-day waiting period will be required before the closing can take place.

The negatives to the new disclosures and processes are minimal. Lenders have spent millions to prepare for these changes, which were announced in 2011.

There has been concern that closing times may have to be delayed or extended, but this shouldn’t be the case if everyone does their part in the process.

Andy Roach is branch manager of Caliber Home Loans Inc. He can be reached at andy.roach@caliberhomeloans.com.



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