New rules give house buyers more time to review documents

October 30, 2015

CFPB’s “Know Before You Owe” gives consumers more time to review loan documents


After being delayed all summer, a new rule from the Consumer Financial Protection Bureau will go into effect on Oct. 3 that will require banks to give consumers more time to review loan documents. But lenders are still warning that the new rules could slow down the time needed to close by at least a week — and won’t sort itself out for several months.

Here’s what’s happening: The federal government requires that as of Oct. 3 loan disclosure documents must combine the information required in the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). Under the new rule change, known as the “Know Before You Owe” rule, or the TILA-RESPA Integrated Disclosure (TRID) regulation, consumers must be given the new combined Loan Estimate (LE) with all the charges, fees and line items three days before the closing, rather than at the closing on the HUD-1 form, which itself will disappear.

“Giving you three business days to review your closing disclosure before you sign on the dotted line is designed to protect you from surprises at the closing table,” the CFBP said in a press release announcing the rule. The rule was supposed to go into effect on Aug. 1 but was delayed after an outcry from lenders and members of Congress who said it would hurt closing times at the height of the real estate sales season.

Closings may take a week more than usual, which could hurt home buyers who are depending on financing to come through quickly to have a chance against all-cash buyers, said Benjamin Niernberg, executive vice president of business development with Proper Title LLC, a title insurance company in Northbrook, Ill. “It can push the closing six days out, but we’re talking about business days, so if it falls on a weekend, it could be even longer,” he said.The new rules have been in the works since November 2013.


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