So…thrill of thrills, I attended a seminar today at the St Louis Association of Realtors to delve into the coming changes to the lending practices that will affect every home purchase.  This was supposed to begin on August 1 but has been delayed until October 3 so the busiest time in the real estate year will be winding down.   So here is what I learned….caveat…this is as I understand things that were presented today.

This is a change mandated at the Federal level to further protect the consumer….buyers mainly…in the home buying and lending process.   This change comes as a direct result of the Dodd Frank bill SO this is FEDERAL LAW.

CFPB has taken over HUD (Housing and Urban Development) as well as other lending like student loans. It is going to provide a simpler one page CLOSING DISCLOSURE which will be easier to read for the consumer.   This is a good thing.   The Closing Disclosure will be generated from the lender not the title company – right now this is just the opposite…the lender would send “numbers” to the title company and then the title company would generate a HUD statement often less than 24 hours before closing.   Now, the borrower MUST receive this a minimum of 3 days prior to closing or closing must be changed.  I also believe that the “pre approval” that buyers have gotten up to this point will be more in depth and this will be better in the long run for overall execution of the contract.  ( we will know more about buyer up front -hopefully)

The problems that will arise are longer time periods from contract to closing.  Right now we are usually 30-45 days out.   With these new regulations it will be closer to and maybe longer than 60 days.  Any major changes (change in loan type, APR increases, addition of pre payment penalties) will require a 3 day “reset” which will potentially delay closings.  And the time from the LOAN COMMITMENT DATE to closing will be longer – at least 2 weeks, maybe longer.   Walk through will need to occur earlier and thus sellers will probably not be out of their homes when the buyer walks through.  This can become complicated if damage is done when seller does move and buyer has already closed.

Sellers must be mindful of contracts that they accept – and the timelines to make sure the proper time frames are accounted for in new contracts.   Using different Title Companies might also complicate things…so if a seller is paying closing costs then they can dictate which title company can be used.   This will help matters from that end.  Cash deals of course are not affected but often a buyer will say they are a cash deal and opt to take a loan out after the contract is accepted.  Once again, timeline will change and closing will take longer.

I am having lunch with one of my lenders – Corey White at USA Mortgage next week to further discuss and understand what is coming.  SO if you are thinking of buying a home… or selling one, NOW is the time to do it and avoid the uncertainty.  Any loan application taken before October 3 will not be subject to these new rules and thus will not be affected.

Oh….and the most awkward change of all…”CLOSING” will now be call “CONSUMMATION”….hmmmm. No comment.