Tuesday, July 28, 2015

New Change Coming to Real Estate Settlement Process:

Effective October 3, 2015, the Consumer Finance Protection Bureau (CFPB) will be implementing new lender and escrow disclosure procedures that will have a profound impact on real estate transactions nationwide.

The intent of the new regulation is to provide coherent consumer disclosures in real estate transactions, enabling consumers to better comprehend costs and conditions of their transactions. The new regulation integrates disclosures required under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).

In fact, the new Loan Estimate (LE) and Closing Disclosure (CD) forms are indeed easier to read than the multiple forms they are replacing.

However, the mandated extended time lines for multiple disclosure notifications and enormous penalties [$5,000 per day and up to $1,000,000] for non-compliance by service providers are going to unfortunately add consumer costs to transactions and slow them down considerably.  Lenders and escrow servicers have noted that the cost of compliance with the new regulations will be significant.


Except for cash sales, very likely gone will be the days of 30 day escrow closes.  Escrows may now take 45 to 75 days to close with the norm likely being 60 days according to escrow sources.  This will place a cost burden on Sellers who would have wished to sell timely, and Buyers who will be confronted with more costly loan rate lock periods and delayed closings.