The Consumer Financial Protection Bureau is a new federal agency which enforces the new Real Estate Settlement Procedure Act regulations.
These regulations apply to:
Anti-kickback: eliminates abusive practices that drive up costs of products to consumers in real estate transactions.
Consumer disclosure: gives buyers and sellers full disclosure of costs of a real estate transaction.
The goals of these new regulations are:
- Easier to use mortgage disclosure forms;
- Improve consumer understanding;
- Aid comparison shopping;
- Prevent surprises at the real estate closing table.
An acronism that has recently emerged from these new regulations and procedures is known as “TRID”.
T = Truth in Lending Act (TILA)
R = Real Estate Settlement Procedures Act (RESPA)
I = Integrated
D = Disclosure
This stands for these new regulations that require the old Good Faith Estimate (now known as the Loan Estimate) and the HUD-1 (now known as the Closing Disclosure), but for a few minor exceptions, be identical. If they are not, the lender is on the hook. Penalties include fines as much as $4,000 per violation, actual damages and attorney’s fees.
In order to avoid these penalties and fines, the lenders will require corrected and reissued loan estimates and closing disclosures, each of which, in most instances, require a three day right of review provided to the borrower prior to settlement. These review periods can only rarely be waived by the buyer.
Along with these new regulations, we will now need to get used to the new RESPA jargon:
“Lender” is now “Creditor”.
“Borrower” is now “Consumer”.
TILA and GFE are now Loan Estimate.
HUD1 is now the Closing Disclosure.
“Closing/Settlement” is now “Consummation”.
That’s right. Settlements will now be known as “Consummations.”
New RESPA rules will go into effect, for most consumer mortgage loans that are applied for, as of October 3, 2015. Coverage is as follows:
- Applies to most closed-end consumer mortgage loans.
- Does not apply to:
- Home equity lines of credit
- Reverse mortgages (use your old HUD-1)
- Mortgages secured by mobile homes or by dwellings not attached to real estate
- Creditor that makes five or fewer mortgage loans in one year.
With the cooperation of all real estate settlement services providers, we will successfully implement these new closing procedures.