Beginning October 3, 2015, the old confusing real estate disclosure forms are out, replaced with streamlined, easy-to-understand forms. Now, two disclosure forms are required instead of the previous four:
- The Loan Estimate will replace the Good Faith Estimate (GFE) and the initial Truth-in-Lending Statement [See RPI Form 204-5 and 221]; and
- The Closing Disclosure will replace the Settlement Statement (HUD-1) and the final Truth-in-Lending Statement. [See RPI Form 402]
To help with the transition, the Consumer Financial Protection Bureau (CFPB) has created a guide for real estate professionals. Review this guide before October 3 so you can ensure the disclosures are delivered properly and closing occurs on time. The CFPB has indicated it won’t pursue lenders who don’t fully comply with the new disclosure rules in the first few months after it takes effect. Rather, they will concentrate on helping lenders fix any mistakes and adjust to the new rules.
Editor’s note — Realty Publications, Inc. will be adapting and making these forms available on our Forms Download page once the CFPB releases high resolution, blank copies of the forms.
The CFPB’s guide includes information on:
- ways to prepare your clients for financing their home purchase;
- common questions and answers about the new disclosure forms;
- what has changed and what remains the same about the mortgage process;
- when closing delays may occur; and
- mortgage resources for clients.
On this last note, the CFPB provides some really helpful tools, to which you can direct clients to help them understand their mortgage.
The CFPB’s Loan Estimate and Closing Disclosure tools explain the most critical parts of the forms your clients need to pay attention to. These tools also explain obscure lender jargon, like prepayment penalty and final/balloon payment.
As their real estate agent, it’s still your duty to answer their closing questions and facilitate their lender interactions as needed. But the CFPB’s tools offer a useful and attractive way of assisting you in keeping your client informed. It also eases the client’s mind to see their questions answered in writing, by a government agency.
Another useful tool for agents and clients both is the CFPB’s home loan toolkit. This 27-page document is chock-full of questions a homeowner needs to ask themselves before beginning the homebuying process, explanations on the mortgage process, along with homebuyer worksheets.
Income and expense sheets are included in the booklet for the potential homebuyer to fill out. This helps them determine how much they can safely pay for their mortgage — even if they qualify for a higher mortgage, their financial goals may require them to stick to a smaller mortgage amount. Also included is a mortgage shopping worksheet, where they can list and compare the mortgages for which they’ve been approved by three different lenders. [See RPI Form 312]
Also take a look at the Borrower’s Mortgage Worksheet, which breaks down the details of each mortgage product under consideration. [See RPI Form 320; Form 320-1]
Real estate agents can personalize the CFPB’s booklet with their company’s logo, to download and print or distribute electronically.
Check out the CFPB’s guide to the new disclosure requirements — and even if you already feel confident in the new forms, their resources for clients are worth a look.
