Starting October 3, 2015, the disclosures associated with loan applications for new home mortgages will change. The new forms are designed to be simpler and more user friendly in an effort to improve on the home buying experience.
The traditional Good Faith Estimate and Truth-In-Lending Disclosure will be replaced by one new form: the Loan Estimate (“LE”). For closed-end credit transactions secured by real property (other than reverse mortgages), the lender is required to provide the borrower with good faith estimates of credit costs and transaction terms. Lenders are responsible for ensuring the figures stated in the LE are made in good faith with the best information reasonably available at the time of disclosure, and generally may not issue revisions to the LE because they later discover technical errors, miscalculations, or underestimations of charges. This new three-page form must be provided to borrowers no later than three business days after they submit a loan application.
Replacing the traditional HUD-1 Settlement Statement and the final Truth-In-Lending Disclosure will be the Closing Disclosure (“CD”). This new five-page form is used to disclose many of the terms and provisions of the loan, as well as the financial breakdown of the transaction. Lenders may estimate disclosures using the best information reasonably available when the actual term or cost is not reasonably available to the creditor at the time the disclosure is made. However, creditors must act in good faith and use due diligence in obtaining the information.
The new forms are significantly easier to understand, leading the way to a better informed borrower.
Additionally, the new laws will implement a new timetable for the closing. Lenders will be required to submit the Closing Disclosure to borrowers at least three days prior, giving borrowers a new three-day review period before the closing. Certain changes to the CD after deliver to the borrower might trigger a new three-day waiting period, including changes that affect the APR, borrower changing loan products, addition of a prepayment penalty to the mortgage, or any changes that affect the value of the property as determined by the lender.
Although these changes are expected to cause a significant amount of delayed closings initially, the new forms are much easier to understand and will help make the closing process an overall better experience for homebuyers.
The traditional Good Faith Estimate and Truth-In-Lending Disclosure will be replaced by one new form: the Loan Estimate (“LE”). For closed-end credit transactions secured by real property (other than reverse mortgages), the lender is required to provide the borrower with good faith estimates of credit costs and transaction terms. Lenders are responsible for ensuring the figures stated in the LE are made in good faith with the best information reasonably available at the time of disclosure, and generally may not issue revisions to the LE because they later discover technical errors, miscalculations, or underestimations of charges. This new three-page form must be provided to borrowers no later than three business days after they submit a loan application.
Replacing the traditional HUD-1 Settlement Statement and the final Truth-In-Lending Disclosure will be the Closing Disclosure (“CD”). This new five-page form is used to disclose many of the terms and provisions of the loan, as well as the financial breakdown of the transaction. Lenders may estimate disclosures using the best information reasonably available when the actual term or cost is not reasonably available to the creditor at the time the disclosure is made. However, creditors must act in good faith and use due diligence in obtaining the information.
The new forms are significantly easier to understand, leading the way to a better informed borrower.
Additionally, the new laws will implement a new timetable for the closing. Lenders will be required to submit the Closing Disclosure to borrowers at least three days prior, giving borrowers a new three-day review period before the closing. Certain changes to the CD after deliver to the borrower might trigger a new three-day waiting period, including changes that affect the APR, borrower changing loan products, addition of a prepayment penalty to the mortgage, or any changes that affect the value of the property as determined by the lender.
Although these changes are expected to cause a significant amount of delayed closings initially, the new forms are much easier to understand and will help make the closing process an overall better experience for homebuyers.
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