The date has been announced and it is now time to start preparing for the new mortgage disclosure rules. In this article, you will find answers to questions including:

  • What are the new mortgage disclosure rules?
  • As a buyer, how do these rules affect me?
  • What is the date the rules go into effect?
  • and more.

Previous Regulations

Currently there are two regulations in place to help do that.

The Truth In Lending Act - TILA or Regulation Z

This regulation was created in 1968. It standardizes the way mortgage fees and terms are calculated and disclosed.

The Real Estate Settlement Procedures Act - RESPA or Regulation X

According to Zillow, this regulation was created in 1974 and prohibits different housing service providers, such as lenders, real estate agents, escrow companies, attorneys etc, “from paying each other fees to refer consumers to each other.” This protects the consumer from inflating real estate transaction costs.

The problem has been that the consumer won’t see the official break down of all the fees until they receive the HUD-1. This is supposed to happen before closing, but sometimes doesn’t until the day of closing.

Oftentimes, the breakdown on HUD-1 and the final Truth in Lending disclosure can differ from the original Truth in Lending disclosure. The original Truth in Lending is given within three days of applying for a home purchase loan.

According to Fox Business, the Consumer Financial Protection Bureau believes this process is too confusing.

The New Regulations

Dennis Rodkin from the Chicago Real Estate Daily, had an interesting way of describing the new regulations,

 “While title companies and real estate agents and lawyers are scrambling to be ready by the deadline, home buyers should feel more like guests at a well-executed dinner party, oblivious to the mess in the kitchen and content to be served each course at just the right time.”

The idea behind the new regulations is to give home buyers more information about their loan before they head to the closing.

As of October 1st, 2015, the consumer will again receive two disclosure forms described as follows:

The Loan Estimate Form

One will be provided at the beginning within 3 days of applying for a home purchase loan. The consumer will receive a Loan Estimate Form. This form will breakdown the fees, cash needed, rate, terms, and costs of the loan over its lifetime.

The Closing Disclosure Form

The second disclosure form will be provided at least 3 days before closing. The consumer will be given a Closing Disclosure Form. The Closing Disclosure Form must look like the first form, the Loan Estimate Form, but will also have the costs paid by the buyer, seller, and third parties.

This process should provide consumers with time to digest the information before it’s too late.

What Do You Think?

Do you think this will make the process easier for the consumer? Would you find it helpful to know all the costs with ample time to make your decision?