The Last-Minute Closing is Dead

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The following was written for Equity Trust by John Dyer, president of Nova Title Agency.  John writes, educates, and is actively involved in all aspects of real estate matters.  Founded in 1999, Nova Title Agency is a full-service real estate title agency providing title and closing services for residential properties, refinancing transactions, real estate owned (REO) properties, and commercial transactions throughout the state of Ohio. John has been the lead instructor for several state-approved continuing education courses for real estate agents.

The way we close real estate deals in our country will change dramatically starting October 3, 2015.  On that day new Consumer Finance Protection Bureau (“CFPB”) regulations go into effect.  The last minute closing will be a thing of the past.

Effective October 3, 2015, lenders will have to provide a Buyer/Borrower a Closing Disclosure Form (“CDF”) three days before they sign the Note and Mortgage and buy the house.  So, the Buyer will not be able to sign papers and buy the house a few hours after the loan is approved.

The CDF is a combination of the HUD 1 and the TIL forms.  Under the new rule the CDF has to be delivered to the Buyer three business days before the Buyer can sign the Note, Mortgage and the rest of the closing package.  As a result, the transaction will not close when the loan is approved, but three to six days later.  The CFPB regulations on the timing are subject to interpretation, and therefore each Lender will have their own way of complying with the rule, some may allow the three days to start when the CDF is emailed to the Buyer, and others will assume that the form is received by the Buyer three days after the form is emailed.

The Buyer, Seller, Realtor and Title Agent will all have to take increased responsibility for various aspects of the transaction as a result of the new rule.

Buyers: Buyers have to be responsible for providing the Lender with ALL of the documents requested by the Lender as soon as possible.  If the Buyer has a critical move in date or other time frame then they must do everything in their power to ensure the loan is done in time; calling the Lender, providing all of the requested documents and making sure all impediments to closing are removed.  Buyers must proactively manage the process instead of being along for the ride.

Lenders: Lenders must honestly state a reasonable time frame for completing the loan and they must also be proactive with the Buyers as to any requirements, sending an email is great, but you have to follow up, follow up, follow up.  Lenders must communicate that any delays will affect the closing of the transaction.

Realtors: Realtors must format the contract for a successful transaction, the dates must be reasonable, no 15 day closings and there should be minimal last minute changes.  Items such as adding a Buyer, submitting a Seller credit Addendum at the last minute even though it was signed two weeks earlier may cause delays.  We all have to think through the entire deal as far in advance as possible.  Thorny issues must be addressed not delayed.

Sellers: Sellers need to get repairs done, resolve any contingencies, comply with Point of Sale laws and be very careful when moving out of the house.

The closing process has always been very fluid, things change, there are many moving parts and a lot gets done at the very end we are all used to this process.  We now have many new challenges, as stated above.  The first few months, with new procedures and new software for Lenders, Title Agents and Underwriters may be difficult.  As Professionals we will continue to work together to achieve the common goals of our clients.

*John Dyer and Nova Title Agency are not affiliated with Equity Trust Company or its affiliates.  The information provided in this article is for educational purposes only and should not be construed as tax, legal, or investment advice.  Whenever making an investment decision, please consult with legal, tax, and financial professionals.