Real Estate Closings To Change August 1, 2015

As parts of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act continue to be phased in, changes are on the horizon.  If you anticipate a real estate closing after August 1^st of 2015 you’ll want to read this.

UPDATE: THIS HAS BEEN PUSHED BACK TO OCTOBER 3, 2015

First, up front, the Good Faith Estimate and the Truth In Lending Disclosures that you currently get from your lender will be replaced with a new Loan Estimate form that combines the two.  The good news?  Five pages on two forms is replaced with three pages on one form.  The example form I’ve seen is very easy to read, so this looks like a win, to me.

The next part is what happens at closing.  Currently, the final Truth In Lending (TIL) disclosure is signed and there is a three page HUD-1 Settlement sheet.  This is replaced with a new Closing Disclosure that combines the two, and is still five pages long.  Again, it looks easier to read, and hopefully to understand.

The other part of this process is that all parties MUST have 3 days to review the Closing Disclosure.  No more last minute changes. In fact, if there are changes over a certain amount (I’ve heard $100), then the 3 day period is reset.  This means that the underwriting department at the lender and the title companies will have to be talking a lot more to make sure that a simple pro-ration mistake doesn’t cause a 3 day reset. 

It also puts more pressure on the real estate agents to make sure that things are as they should be for things like local tax assessments, transaction fees, and home owner/condo  association dues prorations.  Frankly, some agents don’t do a very good job with this, relying entirely on the lender and the title company to capture the correct data and catch errors. That has the potential to cause delays.

Until we see how this actually works out, I will be advising my clients (buyers and sellers) to expect an additional 15 days to close.  Right now, a ‘clean’ deal with a 30 yr conventional mortgage can get closed in about 30-35 days, so it’ll likely be 45-50 after 8/1/15.