The Oct. 3 changes represent a new integrated disclosure rule enforced by the Consumer Financial Protection Bureau (CFPB). The interest rate and closing costs — everything the home buyer should expect to pay at settlement — will be broken down into a new format that is easier for the consumer to understand.
These services and fees are itemized on the HUD-1 Settlement Statement, the standard form used by HUD. Too often in the past, consumers would not understand what is on this form because they would be in a rush to settle before expiration of an interest rate lock. In today’s residential real estate market, sales contracts with a 30-day lock on the interest rate are commonplace.
Another impact is under the new rules, 30-day contracts may become a thing of the past. Instead, the time frame will be extended to the 45- to 60-day range, with a large amount of variance dependent on the lender. While this expanded period is intended to reduce the need for contract extensions resulting from expiring rate locks, this poses significant impacts for the client’s bottom line in a real estate sale situation.
Another important change is that consumers are going to have a mandated period of time to review closing documents prior to settlement. The new regulations require three to seven days after disclosure until settlement.
The key takeaway for residential real estate clients is to make sure, when you are buying or reselling a property, that all of your service providers — lender, real estate salesperson and title company — are up to speed on the new RESPA rules.
You should be confident that they will be able to get your transaction to the settlement table in a reasonable amount of time, keeping your costs to a minimum and ensuring you’re better informed.
