Boston Area Mortgage Rules to Protect Consumers

The Boston area mortgage industry now has new regulations in effect designed for lenders to be more transparent in their dealings with borrowers. The areas of reform are aimed at simplifying and streamlining some of the consumer disclosure documents in order to make it easier for borrowers to understand various lending programs.

Boston Area Mortgage Rules Change: Know Before You Owe

As a result of the last housing and mortgage crisis and the passage of the Dodd-Frank legislation, the Consumer Financial Protection Bureau (CFPB) was established to design simplified forms to address two key areas: post application disclosures and pre-closing information. The CFPB reportedly spent nearly four years researching and testing the new disclosures and are now ready to require Boston area mortgage lenders to implement them.

For their part, mortgage lenders nationwide say the reform has created a huge technological challenge involving additional software programs and thousands on man hours in training and ramping up for the new disclosure procedures.

The disclosure form that is given to the consumer after the loan application begins — known as the Loan Estimate — covers the rules regarding what can and cannot be done by the lender, including cost estimates that must be approved by the borrower in writing before the loan application process can continue. The Closing Disclosure must be given to the borrower within three business days of closing. It captures all the costs paid by the consumer. If the borrower wants to make any changes during the three-day window, the three-day period resets. This, inevitably, will cause delays and potential “domino effects” that could create additional delays in closing.

Boston area mortgage lenders are keeping their collective fingers crossed that the new disclosure requirements will be seamless. However, there are numerous “moving parts,” as the disclosures now impact the real estate industry. While real estate professionals have no direct responsibilities under the new regulations they still have a role in the process. They need to educate their clients about the changes and help them understand that the loan closing transaction may take longer. Additionally, real estate clients will need to understand that there is an increased risk of delays in the loan closing — especially if borrowers try to make “eleventh hour” negotiations or changes within the three-day waiting period.

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