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Forget the days of 30 day home closings. New federal regulations taking effect this summer will provide a better home buying experience for consumers, but will likely slow down the closing process for Realtors, mortgage lenders and title companies, according to Mike McFarland, outgoing president of the Houston Mortgage Bankers Association and a senior loan officer with San Antonio based Legacy Mutual Mortgage.
“This is going to reorganize how the entire Real Estate industry closes transactions,” McFarland said. “We’re talking about turning the entire closing process upside down.”
The Consumer Financial Protection Bureau, created under the Dodd-Frank Act, has been restructuring the process for applying for a home loan, tightening credit requirements to prevent another housing crash of 2008. The latest changes – effective August 1 – involve new forms and notifications timelines that make the home buying process more transparent, However, they also are expected to make 45 day closings the new norm, McFarland stated.
Currently, when buyers seek a loan to buy a house, they are provided with a Good Faith Estimate form and a HUD-1 Settlement Statement form at closing, Both of these forms are being replaced by new forms, the loan estimate and closing disclosure. The first page of both forms will clearly outline to the consumer and lender how much the buyer will pay in closing costs, loan fees, mortgage payments, interest and taxes.
“I’m really happy about this,” McFarland said. “It makes my process of explaining things so much easier,”
However, the new federal regulations also require that homebuyers have 3 business days to review the closing disclosure before signing off on the loan. While this allows consumers ample time to look over their loan contract, this new change will form mortgage lenders – who face greater financial penalties for errors – to slow down their mortgage lending process by as much as 15-20 days, McFarland stated.
“Transactions are difficult, and things happen outside the lender’s control,” McFarland said, “I’m telling my agents to write 45 day contracts. If you want a 30 day closing, that’s impossible now. If you’re looking to do back-to-back, simultaneous closings, that’s not going to happen.”
Few Realtors understand these impending changes, which will have a widespread impact on buyers and sellers, McFarland stated, He estimates that only about half of Real Estate agents in Houston understand the new federal regulations, Since the start of the year, McFarland has led about 20 training classes with title companies, mortgage bankers and Realtors to educate people on what he called “a train wreck that’s coming.”
“The vast majority of the public has no idea that this is going to change everything,” McFarland said. “And it’s going to impact our business.”
Article courtesy of Paul Takahashi and Houston Business Journal
Call The Fellwock Real Estate Group and we will walk you thru this process. It is easy once you understand it!