The New Mortgage Rules: Texans, Saddle Up for Some Big Changes
New mortgage rules go into effect October 3, 2015. Find out how they effect you and how you can best be prepared before you go looking for a new home.
Sometimes watching clients go through the mortgage process is like being a spectator at a rodeo. It’s a competitive sport that leaves home buyers, like the calf in a roping competition, all tied up in confusion.
But new mortgage rules that go into effect October 3, 2015, hope to change all that. They’re aimed at letting you steer the bull by the horns (so to speak) in the lending process and not the other way around.
For the last 30 years, lenders have been required by federal law to give four different disclosure forms to consumers applying for a mortgage: Two were created by one federal agency, the Truth in Lending Act (TILA), the other two by the Real Estate Settlement Procedures Act of 1974 (RESPA). The forms have overlapping and inconsistent language. This has been confusing to home buyers.
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act directed the Consumer Financial Protection Bureau (CFPB) to integrate these mortgage loan disclosures.
Here’s How the New Mortgage Rules Benefit You:
- There is now one uniform Loan Estimate Form. This allows you to shop around for a loan and easily compare the costs from lender to lender to see who has the best deal.
- After you fill out the mortgage application, lenders have three business days to give you a precise written breakdown of your costs. These costs include: a detailed line-item breakdown of fees, cash needed to close, rate, and terms and costs over the loan.
- At least three days before closing, the lender must send you a Closing Disclosure form. It looks just like the loan estimate, but also separates what costs are paid by the buyer, seller, and third parties. This means you’re reviewing the final terms in the same format you saw it initially.
René LaVenia, senior mortgage advisor, says the new mortgage laws give you the power to choose and provide a “uniform standard for all creditors/lenders that improves customer understanding, assists with comparison shopping and helps prevent surprises at the closing table.”
Here’s the Downside of the New Mortgage Rules:
- Closing on a home could take longer, turning a traditional closing of 30 days perhaps into 45.
- The closing cannot take place until three days after the closing disclosure is given.
- If information in the closing disclosure changes for any reason, the three days start again after the new changes are made.
The new mortgage laws are aimed at helping make the home buying process better for you. But mortgage advisors, like LaVenia, also stress this important step to help make the buying process easier for everyone involved: “Send your lender your income and asset documents upfront, when you first start looking.”
Mortgage Loan Officer Tony Varisco IV offers this additional advice — plan ahead. “The reason for so many stressful real estate transactions, delayed closings, and even applications declined in underwriting can almost always be pinned on the ABSENCE OF planning and organization with respect to the mortgage loan PRIOR TO the execution of the purchase contract,” says Varisco.
Only time will tell how consumers, mortgage lenders, title companies, and even real estate agents are affected by the new mortgage rules.
Enica Jordan is a Realtor with Coldwell Banker United, Realtors in the Atascocita/Kingwood office in Texas. She's lived in the Houston area for the past 11 years. She has a background in social media and marketing. Enica is a wife and busy mom who loves helping educate others in all topics that are home-related.