What You Need to Know: What is Consumer Financial Protection Bureau CFPB?

For more than 30 yeas, federal laws has required all lenders to provide two disclosure forms to consumers when they apply for mortgage and two additional short forms before they close the home loan. These forms were developed by different federal agencies under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). To help simplify matters and avoid the confusing situations consumers have often faced when purchasing or refinancing a home in the past, the Dodd-Frant Act provided for the creation of the Consumer Financial Protection Bureau (CFPB) and charged the bureau with integrating the mortgage loan disclosures under the TILA and Respa.

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On November 20, 2013, the CFPB announced the completion of their integrated mortgage disclosure forms along with their regulations for the proper completion and timely delivery to the consumer. These regulations are known as “The Rule”.

Any residential loan originated after August 1, October 1, October 3 2015 will be subject to the new rules and forms set forth by the CFPB. The Rule replaces the Good Faith Estimate (GFE) and early TILA form with the new Loan Estimate. It also replaces the HUD-1 Settlement Statement and final TILA form with the new Closing Disclosure.

Changes to the Closing Disclosure Timing

In addition to new forms for residential mortgage transactions, the new regulations also require delivery timetables for delivery to consumers, impacting when a closing can take place and disbursements made.

What this means for consumers?

Combining several forms and additional statutory disclosure requirements into two forms. This will reduce paperwork and consumer confusion.

• Using clear language and design that will help consumers understand complicated mortgage loan and real estate transactions
• Highlighting the information that has proven to be most important to consumers. On the new forms, the interest rate, monthly payments, and the total closing costs will be clearly presented on the first page. This will make it easier for consumers to compare mortgage loans and choose the one that is right for them
• Providing more information about the costs of taxes and insurance and how the interest rate and payments may change in the future. This information will help consumers decide whether they can afford the mortgage loan and the home, now and in the future
• Warning consumers about features they may want to avoid, like penalties for paying off the loan early or increases to the mortgage loan balance even if payments are made on time
• Making the cost estimates consumers receive for services required to close a mortgage loan more reliable, for example, appraisal or pest inspection fees. The rule prohibits increases in charges from lenders, their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies. Examples of the specific exceptions include when information provided by a consumer at application was inaccurate or becomes inaccurate, or when the consumer asks for a change in the services
• Requiring that consumers receive the Closing Disclosure at least three business days before closing on the mortgage loan. Currently, consumers often receive this information at closing or shortly before closing. This additional time will allow consumers to compare the final terms and costs to the terms and costs they received in the estimate. That will better equip them to raise any questions before they go to the closing table

Here are list of questions that consumer can ask their lender when applying for mortgage:

• How is your company doing with the upcoming TRID changes?
• Can you tell me what sorts of last minute changes to the contract could affect APR?
• How are you preparing and delivering the Closing Disclosure?
• Will you allow electronic acknowledgement of receipt of the Closing Disclosure in order to shorten the 3 day delivery period?
• How are you going to keep me informed about the progress of the delivery of the Closing Disclosure?
• Will you be engaging and informing the listing agent about delivery/acceptance of the Closing Disclosure?
• What is the goal for delivery of the Closing Disclosure? How many days prior to close of escrow will you be shooting for?
• If there are two borrowers, must both acknowledge receipt of the Closing Disclosure? If so, does the waiting period start after the last acknowledges receipt?

Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.

If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.

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