A Primer for a New Era in Closings: For loan applications received beginning August 1, 2015 some info courtesy of ALTA

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1 A Primer for a New Era in Closings: For loan applications received beginning August 1, 2015 some info courtesy of ALTA

2 A New Era in Closings Applicable Loans Final rule applies to most consumer mortgages, Except: Home-equity lines of credit Reverse mortgages Mortgages secured by a mobile home or dwelling not attached to land Creditor s making 5 or fewer loans per year Commercial purpose loans

3 A New Era in Closings Applicable Loans Final rule applies to most consumer mortgages, Except: Certain no-interest loans secured by subordinate liens made for the purpose of down payment or similar home buyer assistance, property rehab, energy efficiency, or foreclosure avoidance or prevention

4 New Terminology TERMS/ACRONYMS RULE: TRID= TILA (Truth in Lending Act)- RESPA(Real Estate Settlement Procedures Act) Integrated Disclosure TILA & GFE are now the Loan Estimate-3 pages

5 New Terminology Lender is now the Creditor Borrower is now the Consumer HUD-1 is now the Closing Disclosure ( CD ) Closing/Settlement is now Consummation

6 Enforcement Powers of CFPB (Title X, Subtitle E) Relief Available (Sec 1055) Rescission or reformation of contracts Refund of monies or return of real property Disgorgement or compensation for unjust enrichment Payment of Damages Public notification of violation Limits on activities or functions Civil penalties Up to $5,000/day If reckless, up to $25,000/day If knowingly, up to $1,000,000/day

7 Delivery Requirements Must be received by consumer no later than three business days before consummation Business day includes Saturday, excludes Sundays & legal holidays

8 Delivery Requirements Delivery Method: Hand delivery Courier/express mail Electronic-must comply with E-sign US Postal servic box rule: presumption of receipt three business days after placed in mail

9 Delivery Requirements Delivery Method: Potential Privacy issues: Gramm/Leach/Bliley What about seller side figures? To follow

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11 Consummation v. Closing Consummation: the time that a consumer becomes contractually obligated on a credit transaction. State contract law controls When is borrower legally obligated to accept the loan?

12 Consummation v. Closing Closing/Settlement: the process of executing legally binding documents regarding a lien on property that is subject to a federally related mortgage loan. Differences in northern/southern Ohio-SW Ohio- table closing, these two dates are likely to be the same.

13 The New Forms Loan Estimate Three pages long Combines early two-page TIL and threepage GFE + new disclosures required by Congress under Dodd/Frank Who provides? Two options: lender or mortgage broker

14 Loan Estimate The New Forms When? Within three days of loan application Definition of application Still Subject to tolerances No fees charged by lender until after consumer communicated intent to proceed (exception: credit report)

15 The New Forms Closing Disclosure HUD-1 Replacement Five pages long Combines three-page HUD-1 and final two-page TIL Who provides? Two options: lender or combination of lender and settlement agent

16 The New Forms When? Three business days before closing Redisclosure : changes in APR, and loan product, addition of pre-payment penalty All other changes require borrower to receive revised CD at or before consummation

17 Closing Table Closing Table will have 4 main document sets: Borrower s Closing Disclosure (updated at or before consummation) Seller s closing disclosure (provided at or before consummation) Final Closing Statement (prepared by Settlement Agent) Borrower s contractual documents

18 Closing Table Why a Final Closing Statement? Because all documents have different purposes, but need to match on the bottom line Final closing statement will show the actual disbursement of funds in the transaction

19 Closing Table Why a Final Closing Statement? It will group charges into the certain categories It can show both buyer and seller amounts or be limited to one side Settlement agents regulatory compliance Additional information not shown on the CD

20 Closing Table Why a Final Closing Statement? Clarification of possibly conflicting information shown on the CD Closing (settlement) date v. Closing (consummation) date Itemization of aggregated fees Special CFPB rules regarding disclosure of certain title insurance premiums

21 Closing Table Who prepares and delivers the Seller s Disclosure? Prepared and delivered by Settlement agent Question whether 3-day delivery rule is applicable At or before consummation Copy to buyer s lender

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23 Closing Table What is a Closing Statement? A disbursement statement showing the actual distribution of funds in the transaction Charges grouped into certain categories Can show both seller and buyer disbursements or be limited to one side

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32 Questions?