New Mortgage Rules – What You Need to Know

Posted by Nikitas Tsoukalis on October 30, 2015

New Mortgage Rules – What You Need to Know

When you apply for a car loan, new credit card or special financing through some other entity, approval or denial is usually granted in a matter of minutes. Simple enough, right? But if you’ve ever purchased a home before, you know that this is hardly the case when it comes to a mortgage loan. In fact, “simple” is probably the last term that many people would use to describe the process. Yes, home loans are the exception to a lot of the credit approval norms. There’s pay stubs, bank statements, credit reports and more involved in the home buying process, so much so that it’s not uncommon for 30-45 days (depending on what type of mortgage you’re applying for) to pass before getting approved or denied for the loan. In large part, you can thank the baby boomers generation for the tedious process that is getting a home loan these days, as the much more relaxed process from year’s past resulted in the housing fallout and economic recession in the mid to late 2000s. Anyway, there’s now hope for a smoother mortgage process thanks to the Consumer Financial Protection Bureau (CFPB) and some new disclosures that have recently been instituted. Here’s a look at the new rules and how they may offer hope for a better mortgage process moving forward:

New CFPB Disclosure

The new CFPB disclosures took effect on October 3 and aim to smooth the mortgage process in two ways:
  1. It cuts the number of disclosure forms in half: Instead of having to take out four forms, many of which just present the same information over and over again, borrowers will only have to take out two – the Loan Estimate and Closing Disclosure. This is intended to present information to borrowers in a more simple, easy-to-understand manner than before.
  2. Extended review time: Previously, borrowers only had 24 hours to review mortgage documents. This timeline now increases to three days. This enables borrowers to get more thorough answers to any questions they may have about the mortgage process and make changes if necessary. The only disadvantage to this new part of the disclosure is that any last-minute changes will slow down the process. For instance, if there’s a change in any of the documents on the day of closing, the clock will reset and the home won’t be able to close for another 72 hours, not only delaying the sale of the home, but potentially jeopardizing any interest rate locks.
While the new disclosures are intended to make the mortgage process smoother and easier to understand, experts warn that it may take time for real estate professionals to get up to speed on these new rules and regulations, so be patient at first. But in the long run, it’s likely to make the process a lot more transparent and streamlined for borrowers.