New Loan & Closing Disclosures Required October 3rd

New closing documents will be required for all closings starting October 3rd.  The HUD-1 Settlement Statement, Good Faith Estimate and Truth-in-Lending disclosure forms will be replaced by two new closing forms . . . a Loan Estimate and Closing Disclosure.

The new Loan Estimate form is due to consumers three days after they apply for a loan, while the Closing Disclosure form is due three days prior to closing, giving the consumer more time to review the costs of their mortgage. Borrowers will not have a choice to waive the three-day review period.

The Loan Estimate form shows the loan amount and interest rate, what the borrower’s monthly payment will be, estimated taxes and insurance, and how much cash is required to close.

Consumers may face slightly longer closing times as the industry adjusts to the new process. As with anything new, there will be a learning curve, and lenders, closing agents, title insurers, insurance agents and real estate agents will need to come together sooner to coordinate all the elements of the closing.  If any changes happen at the last minute that affect the mortgage, then there will be another 3-day waiting period.

Prior to the new rules, changes could be made at the last minute and closing dates could still be met.  Now, however, because of the extra 3-day review period, last minute changes can become an issue.

The changes are good for consumers.  The forms more clearly describe the costs in a way that consumers can understand.