Communication Is Key as Realtors®, Lenders Adjust to New Disclosure Requirements
WASHINGTON (May 12, 2015) – Realtors® should prepare themselves now for the new disclosure requirements being implemented by the Consumer Financial Protection Bureau later this year, and communication between all parties in the real estate transaction is essential in ensuring a smooth transition, according to speakers at a regulatory issues forum here at the 2015 Realtors® Legislative Meetings & Trade Expo.
CFPB Director Richard Cordray and industry experts discussed how mortgage lenders, Realtors® and consumers can best prepare for the CFPB’s Real Estate Settlement and Procedures Act and Truth in Lending Act, or RESPA-TILA, integrated disclosure requirements going into effect on August 1.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., kicked off the forum addressing a packed room of Realtors® about the importance of understanding and following the regulatory change. “The regulatory issues we're facing are extremely complicated, and because they play such a big role in the real estate transaction, it's important that we embrace them and move forward,” he said.
Consumer Financial Protection Bureau Director Richard Cordray discusses how Realtors® and consumers can best prepare for new disclosure requirements being implemented August 1.
Cordray said the CFPB’s new mortgage rules are smart for the industry and are designed to educate and empower consumers to “know before they owe.” He stressed the importance of preserving reliability in the mortgage market and ensuring that consumers have the knowledge upfront they need when buying a home, which he labeled as likely one of the biggest financial decisions they’ll make in their lives.
“Consumers taking out a loan to buy a home should be ensured they aren't set up to fail,” he said. According to Cordray, the new forms – the Loan Estimate and Closing Disclosure – improve consumer understanding of the mortgage process sooner, aid in comparison shopping and help to prevent unexpected issues at the time of closing.
Mindful of the industry’s concerns about delivering both forms within three business days, Cordray said the CFPB listened, and has limited the possibility of closing delays to three instances: changes in the annual percentage rate of a mortgage loan of more than one-eighth of a percent for fixed-rate loans or more than one-fourth of a percent for variable-rate loans, the addition of a prepayment penalty and a change in the mortgage product, such as moving from a fixed-rate mortgage to an adjustable-rate mortgage.Cordray said the CFPB listened, and has limited the possibility of closing delays to three instances: changes in the annual percentage rate of a mortgage loan of more than one-eighth of a percent for fixed-rate loans or more than one-fourth of a percent for variable-rate loans, the addition of a prepayment penalty and a change in the mortgage product, such as moving from a fixed-rate mortgage to an adjustable-rate mortgage.
“The timing of the closing date is not going to change based on the final walk-through,” he stressed.
Cordray concluded his remarks by acknowledging that the new forms represent a major undertaking for lenders, settlement agencies, vendors and Realtors®. “We continue to receive input and are listening close to any additional concerns out there as we move closer to the implementation date,” he said.
Also sharing their insights on the rule changes were Penny Reed, vice president of settlement services at Wells Fargo; Reneé Gonzales, executive vice president of Core Services, president of Long Title Agency and managing director for Long Mortgage Company; and Phillip Shulman, a partner at K&L Gates LLP.
Given the complexity and importance of continued communication between lenders and real estate agents during a transaction, the biggest concern among the speakers was making sure everyone – including the buyer and seller – are on the same page throughout the transaction to avoid closing delays.
Sharing her insights from the lender perspective, Reed explained that the industry is as prepared as it can be for August 1 and said the top priority is abiding by the new rules while making sure it’s done with minimal impact to consumers.
“It’s our duty as lenders and Realtors® to work together on behalf of our clients and manage their expectations as they move forward with buying or selling a home,” she said.
On Thursday, Polychron will testify before the U.S. House Financial Services Committee about the rule changes. NAR is generally supportive of CFPB’s move to harmonization, as long as it benefits consumers and makes the real estate transaction smoother.
On Friday, meeting attendees can learn more about RESPA-TILA at the “RESPA 2015: Big Changes Ahead” forum at 10:30 a.m. EDT. Shulman will go into more detail about the changes to the closing process, the CFPB’s increased enforcement on anti-kickback provisions and the greater scrutiny of marketing agreements under RESPA.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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