Mortgage terms will be simpler for home buyers to read and understand come Aug. 1. Borrowers will receive one disclosure, the Loan Estimate, detailing the terms and projected closing costs shortly after application, and another, the Closing Disclosure, just before signing off.
The new forms, mandated by the Consumer Financial Protection Bureau, will likely seem to consumers a relatively minor, if welcome, change. But for the lending industry, and all the other parties involved with mortgage transactions, preparing for the switch is a massive undertaking.
The new forms are part of a nearly 1,900-page rule created by the bureau to fulfill its obligation under the Dodd-Frank Act to integrate and simplify the four different mortgage disclosures currently required under the Truth in Lending and Real Estate Settlement Procedures acts. Commonly referred to as the TILA-RESPA rule, it became final back in November 2013. With the Aug. 1 effective date looming, the lending industry is still scrambling to comply.
“I think it was an ‘out of sight, out of mind’ thing, and maybe people were hoping it would get delayed,” said Grace Currid, a senior vice president and chief credit officer for HomeBridge Financial Services, a nonbank lender. “Now the reality of the change is hitting the lending industry and everyone is just starting to understand the magnitude.”
The rule doesn’t just streamline the disclosure forms, making the features and costs of the mortgage more plain. It rewrites long-established rules about the timing and method of disclosing, what triggers a disclosure requirement, and under what conditions you might need to re-disclose, said Jonathan Corr, the chief executive of Ellie Mae, a provider of loan origination and other software systems for the mortgage industry.
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