By William M. Aukamp
It has been a long time since I last represented banks or borrowers at residential mortgage closings, but one of my colleagues does and the other day I noticed he was carrying a folder as thick as the Manhattan telephone directory used to be back in the days when such directories were printed. I was curious about what kind of transaction could generate enough documents to account for such a thick file. I was surprised to learn that it was a garden variety residential mortgage closing. I had a general familiarity with RESPA and the HUD-1 disclosure form mandated by its implementing regulations, but that knowledge is useless today. The HUD-1 has mushroomed into three forms. This reminds me of Fourth of July fireworks, when a rocket rises and then splits into three pieces. I asked my colleague where one would go to become better informed about the new rules. He suggested doing a Google search for T R I D. I had never heard of this acronym before. I followed his suggestion, which resulted in my winding up on the web site of the Consumer Financial Protection Bureau (CFPB). It was chock full of information about T R I D, more than enough to make me glad that I no longer represent parties to residential mortgage transactions. Among the resources available on the CFPB site was a Small Entity Compliance Guide. In the hope that it would make me an instant expert on the subject, I downloaded the Guide. But the Guide, intended to explain the new rules in simple terms, was 90 pages in length. To save paper and ink, I opted not to print the guide. However I did scroll through it in order to try to find the salient provisions.
Here are some of the things I discovered. As best I can tell, three, or possibly, four forms are required. There is a Closing Disclosure, a Loan Estimate Disclosure and, if there should be any modification to the Closing Disclosure, a Modification To Closing Disclosure. In Addition, lenders must provide to borrowers a list of service providers. The latter could prove to be troublesome. What criteria, if any, should lenders apply in determining who gets to be included in the list. The form also provides space for listing service providers who borrowers may not use, which seems to amount to a sort of blacklist. All of this could result in corrupt behavior involving loan officers and service providers desperately trying to get on the list or, at least, avoiding the blacklist. The information required to be disclosed is voluminous and includes such critical information as the real estate brokers license ID.
The CFPB has also provided a Guide To Loan Estimate and Closing Disclosure Forms, that can be downloaded from its web site. If you are looking for a nice, simple explanation you will be disappointed, because it is 96 pages in length. So we now have “simple” explanations of the new rules and the required forms that total 186 pages. One shudders to think of how many pages it would take to describe all of this in non simple terms. Aside from the content of the forms, one can easily get tangled up in the timing requirements. The Loan Estimate Form must be mailed to the borrower no later than the third business day after receiving the application and again mailed no longer than the seventh business day before consummation of the transaction. The CFPG has pointed out that consummation is when the parties become legally obligated, a determination to be made under state law, and not necessarily the closing date. Adding to the confusion is the fact that two different definitions of business day are used. For purposes of providing the loan estimate, it “is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions.” The creditor must ensure that the consumer receives a revised Loan Estimate no later than four business days prior to consummation. For this purpose, a business day “means all calendar days except Sundays and holidays specified in 5 U.S.C. 6103 (a) such as New Years Day, the birthday of Martin Luther King,Jr., Washington’s birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.”
I could go on to point out other features of the new rules, but I do not want to get in over my head, so I will stop here. What I can say, without equivocation, is that as a result of the new rules, residential mortgage closings have become more time consuming and expensive, to a point that they provide a disincentive to banks to make residential mortgage loans and for attorneys to become involved in such transactions.
Oh for the good old days. Where have you gone HUD-1?
To learn more about the Author http://werbsullivan.com/attorneys/william-aukamp/