Expert Advice: Ready For Fewer Closing Documents? Marcus McCue Says Changes might make it a reality

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Changes are coming to some of the key documents that homebuyers sign when they
close on a mortgage loan. Government agencies are behind these changes, so it should
come as no surprise that they’re late. The changes to the Good Faith Estimate, Truth-in-
Lending Disclosure and HUD-1 Settlement Statement — required by the Dodd Frank Act
— probably won’t take effect until the middle of 2013.

As a refresher course, these three documents, forms that anyone who takes out a
mortgage loan will see, spell out exactly how much homebuyers will pay in closing
costs and interest for their home loans. The documents also tell homebuyers how many
mortgage payments they’ll have to make and when those payments are due. They’ll also
list the interest rate that they are paying to borrow their mortgage dollars.

The Consumer Financial Protection Bureau is now gathering comments to its proposed
changes. This comment period ends Nov. 6, after which the final changes will take effect.

I recently spoke to Marcus McCue, senior vice president with Guardian Mortgage, about
the possible changes to these key mortgage documents and what they might mean to
consumers.

Candy: My mortgage is two inches thick of mind-numbing paperwork in my safe deposit
box. How will the new changes help that?

Marcus: We’re not sure yet, but we hope that the proposed changes will result in more
accurate fees ad estimates across the board and fewer surprises for borrowers. It should
also mean that the forms and disclosures will be easier to understand. Finally, it should
prevent a greater number of consumers from taking out mortgage loans that they can’t
afford in the long run.

Candy: Sounds too good to be true. Do you see any negative effects?

Marcus: Initially, due to the change in forms, it might take lenders more time to prepare their estimates. That could result in longer approval times for loans, but should not be an issue after the adjustment period.

Candy: I’m sure consumers would love to receive fewer documents when taking out a
mortgage loan. How will that happen under these changes?

Marcus: The Good Faith Estimate and the Truth-in-Lending Disclosure will be
combined into one form called the Loan Estimate. The proposed format is an
improvement on the previous form, but the changes will likely cause confusion for
borrowers who have purchased homes previously.

Candy: What about the accuracy of the fees listed on this new Loan Estimate?
How “guaranteed” will the listed fees be?

Marcus: There will be nearly no variation allowed on a larger number of fees, especially
those coming from vendors such as title companies and appraisers. Today, the only fees
that can’t vary from the Good Faith Estimate, for instance, are the lender origination
charge and points or credits. If these changes take place, fees for appraisals, credit
reports, flood certificates, pest inspections and other services must not differ from what
will be listed on the Loan Estimate.

Candy: Wow! That will be a big shift for those companies. Any other changes that will
affect homebuyers?

Marcus: Lenders must provide their customers with the new Closing Disclosure, which
combines the current HUD-1 statement and the Truth-in-Lending Disclosure, three days
before closing. That’s a slight change from today, when the HUD-1 statement must be
provided one day before closing. It will delay some closings.

Candy: I don’t know if the Consumer Financial Protection Bureau will listen, but what if
I — or any of my readers — want to make comments on these new changes?

Marcus: Comments are welcome from everyone. You can make them here.

Joanna England is the Executive Editor at CandysDirt.com and covers the North Texas housing market.

No Comments

  1. Skeptical on October 31, 2012 at 9:39 am

    First off, there is no way that these things can take effect in mid-2013. Since the CFPB won't publish what these new rules are before January 2013 at the earliest, lenders and title companies can't start wasting, er, spending the tens-if-not-hundreds of thousands of dollars each to prepare their hardware/software to handle these changes. I can't imagine that the rule clarifications, software/hardware changes, and training can be completed before the calendar says 2014.

    Secondly, the CFPB is wasting everyone's time and money here. The reason mortgage loans went bad: I would estimate that 99% was due to borrowers overextending themselves (relative to personal wealth, job security, unexpected health issues, etc) and maybe only 1% was due to misrepresentation by real estate professionals (lenders, title companies, etc). Yes that 1% should be prevented, but at what cost?

    Third, and most importantly, over the past 4 years (starting under Bush, continuing under Obama, so this is not a partisan comment) politicians have wanted to LOOK LIKE they are doing something to fix the mortgage meltdown from happening again. (You've seen it with the Truth-in-Lending, Good Faith Estimate, 2010 changes to the HUD, and now with the CFPB.) Never mind the fact that pretty much NOBODY in the real estate profession feels like the consumer has been helped by these changes. Conversely, in many ways the changes have made things MORE confusing to the consumer. So this CFPB change has a decent likelihood to make it worse for consumers rather than better.

    Fourth, just a parting thought. With the costs of software/hardware changes, won't this new regulation run more of the little guys (small lenders and small title companies) out of business? The lenders are going to be held accountable (whatever that means) by the CFPB getstpo for any errors that they make AND/OR that the title company makes. Won't that require deeper pockets from lenders to cover liability? And won't lenders avoid doing business with smaller title companies who they are not familiar with because those lenders don't want to be on the hook? This could be a job killer while also re-enforcing Too Big To Fail.

    I think we all need to beware of Greeks (well, CFPB in this case) bearing gifts…

  2. Skeptical on October 31, 2012 at 9:39 am

    First off, there is no way that these things can take effect in mid-2013. Since the CFPB won't publish what these new rules are before January 2013 at the earliest, lenders and title companies can't start wasting, er, spending the tens-if-not-hundreds of thousands of dollars each to prepare their hardware/software to handle these changes. I can't imagine that the rule clarifications, software/hardware changes, and training can be completed before the calendar says 2014.

    Secondly, the CFPB is wasting everyone's time and money here. The reason mortgage loans went bad: I would estimate that 99% was due to borrowers overextending themselves (relative to personal wealth, job security, unexpected health issues, etc) and maybe only 1% was due to misrepresentation by real estate professionals (lenders, title companies, etc). Yes that 1% should be prevented, but at what cost?

    Third, and most importantly, over the past 4 years (starting under Bush, continuing under Obama, so this is not a partisan comment) politicians have wanted to LOOK LIKE they are doing something to fix the mortgage meltdown from happening again. (You've seen it with the Truth-in-Lending, Good Faith Estimate, 2010 changes to the HUD, and now with the CFPB.) Never mind the fact that pretty much NOBODY in the real estate profession feels like the consumer has been helped by these changes. Conversely, in many ways the changes have made things MORE confusing to the consumer. So this CFPB change has a decent likelihood to make it worse for consumers rather than better.

    Fourth, just a parting thought. With the costs of software/hardware changes, won't this new regulation run more of the little guys (small lenders and small title companies) out of business? The lenders are going to be held accountable (whatever that means) by the CFPB getstpo for any errors that they make AND/OR that the title company makes. Won't that require deeper pockets from lenders to cover liability? And won't lenders avoid doing business with smaller title companies who they are not familiar with because those lenders don't want to be on the hook? This could be a job killer while also re-enforcing Too Big To Fail.

    I think we all need to beware of Greeks (well, CFPB in this case) bearing gifts…

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