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.