Author: Mikel Dunnagan
A lot can happen in three days, but a delayed mortgage loan closing is not one of them, according to the CFPB. Consumers will receive their new, easier to understand closing document, the Closing Disclosure, three business days before closing. This will give them more time to understand mortgage terms and costs permitting them to know before they owe.
Providing three business days to review the Closing Disclosure protects the consumer from surprises at the closing table, giving them time to consult with a lawyer or housing counselor and ask questions about the terms of the mortgage.
If there is a change to any one of the below three, very specific and important items, lenders must provide an additional three business days to review the updated disclosure.
- Increasing the annual percentage rate (APR) by more than 1/8 of a percentage point or 1/4 of a percentage point for an irregular payment loan (decreasing the interest rate or fees does not cause a delay)
- The addition of a prepayment penalty
- Changes in the loan product, for example from a fixed-rate to an adjustable-rate loan
Lenders have been required to provide a 3-day review for these changes in APR since 2009, thus the new rules are simply business as usual and do not pose an additional burden.
However, many things can change in the days leading up to closing that will not require a new three-day review period, including typos on forms, problems discovered on a walk-through and most changes to payments made at closing, including changes that require seller credits.
Lenders and their closing partners including title companies, attorneys and realtors should work together to accommodate the three-day time frame for review of the new Closing Disclosure.