MORTGAGE LOANS

There are new disclosure rules for mortgage loans that take effect for all mortgage loans applied for on or after October 3, 2015.  These disclosure rules apply to all lenders, to closed-end mortgages only on both purchases and re-finances.  They do not apply to home equity lines of credit.  There are two new disclosure forms that have been created.  One, a loan estimate form that replaces the initial truth and lending disclosure and good faith estimate form; and, two, a closing disclosure form that replaces the final truth in lending form and HUD-1 settlement statement.  All lenders must provide the loan estimate form within three days of application for the loan.  The new loan estimate form provides projected payments.  In other words, what the monthly payment would be of principal, interest, mortgage insurance and estimated escrow payment for taxes and insurance.  The loan estimate form also has a section regarding the cost at closing.  The third part of the new loan estimate form shows a calculation of the total amount of interest the borrower will pay over the loan term as a percentage of the loan amount.  The biggest change that would affect closings in the Erie County and Niagara County region is the new closing disclosure statement that replaces the HUD-1 settlement statement.  Typically the HUD-1 settlement statement was provided to the borrower/buyer’s attorney before closing.  The new requirements state that the borrower/buyer must have the new closing disclosure statement in his/her possession three business days before closing.  Business days do not include Sundays or federal holidays.  If there are any changes to the closing disclosure statement they must be made and then given to the borrower/buyer three business days before closing.  The reality of this new closing disclosure statement is that coordinating a sale of an existing home and purchase of a new home at the same time will be challenging. 
 
As time goes by I am sure the kinks in the new system will be worked out.  But for now it is going to be a completely new process compared to how we used to do closings.
 
By Stephen Pusatier | Published February 11, 2016 | Posted in Uncategorized