Lender/Settlement Agent Regulatory Alert: Nov. 6 Deadline to Prevent Proposed CFPB Disclosure Rule From Delaying Closings

by Richard Vetstein
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Mandatory 3 Business Day Waiting Period Will Delay Closings

Action Needed: Comment On Proposed Rule

While our attention has been diverted from more important issues such as Hurricane Sandy and the election, please be advised that November 6, 2012 is the last day for lenders, settlement agents, Realtors and the public to comment on the controversial new combined Truth and Lending/HUD-1 Disclosure rules proposed by the new Consumer Financial Protection Bureau (CFPB). For those who don’t know, the CFPB has proposed a major overhaul to closing disclosures, combining the Truth In Lending and the HUD-1 Settlement Statement into a single 5 page disclosure form.

Of paramount concern to the real estate community is the proposed Three Business Day Rule, which would require that lenders provide the final Closing Disclosure (the new HUD-1) at least 3 business days prior to the closing. The major problem with this rule is that if there are changes in settlement and closing figures between the time of disclosure and the closing, the consumer must be provided a new form, and the closing must be delayed for at least 3 business days.1

In today’s lending environment, last minute changes to settlement numbers are common, and given the crush of underwriting tasks, final closing figures are typically provided 24-48 hours prior to the closing, or even the day of closing. Moreover, there are often delays getting information from outside sources — real estate tax information from municipalities, insurance information from independent agents, final water/sewer readings, oil bills and 6d condo fees from Realtors, and payoffs from sellers — all of which are out of the control of the lender and the closing attorney.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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