New Mortgage Disclosures for Real Estate Closing Transactions

Beginning this August, new mortgage disclosure statements will be used for real estate closing transactions in South Carolina. These changes are being implemented at the direction of the Consumer Financial Protection Bureau. The new disclosure statements and the rules governing their existence are intended to improve consumer understanding of real estate closing documents, better comparison shopping, and avoid surprises of additional costs at the closing table.

The new mortgage disclosure statements come at the direction of the Consumer Financial Protection Bureau, or CFPB. The CFPB is a governmental agency that reviews financial lending practices to insure greater consumer protection. The CFPB reviews current lending practices, makes recommendations, and implements changes in order to protect consumers from practices that led to the most recent recession. The CFPB was formed by the Congressional approval of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act.

The Dodd-Frank Act was signed into law on July 21, 2010 as a reaction to the lending practices that contributed to the recession of 2007. The legislation implemented major financial regulatory reform aimed at preventing another significant financial crisis. Additionally, the Dodd-Frank Act focused on greater lending transparency, accountability, and implementing rules for consumer protection. As referenced above, it also gave rise to the CFPB.

On July 21, 2011, the CFPB gained control over the Real Estate Settlement Procedures Act, or RESPA. Since its adoption, RESPA has governed the closing of real estate transactions. Now, the CFPB is responsible for managing and enforcing RESPA’s rules and regulations. The new mortgage disclosure statements that are being implemented this August were created in harmony with the purposes of the CFPB.

The new mortgages disclosure statements are outlined in the “Final Rule” adopted by the CFPB. The Final Rule was released on November 20, 2013 in accordance with the Truth in Lending Act and RESPA. The Final Rule replaces the “Good Faith Estimate” and the “early” Truth in Lending disclosure. The two new mortgage statements are called the “Loan Estimate Form” and the “Closing Disclosure Form.”

The purpose of these new statements and the rules regarding their implementation are to provide consumers with increased information of the lending agreement and protection from abusive lending practices. Through their implementation, the consumer will be able to more easily ascertain the risk factors involved with the lending agreement, the actual cost of the lending agreement, and the monthly payment schedule. The changes will also make comparison shopping of lending institutions easier. The new statements also provide greater time for the consumer to review the agreement with the expectation of achieving greater awareness of the charges associated with the closing transaction.

Overall, the new mortgage disclosure statements to be implemented this August by the CFPB are intended to result in greater consumer awareness and protection in the lending process. However, it will take time and effort for lending institutions, real estate agents, and real estate closing attorneys to become familiar with the new rules governing the implementation of these new statements. At Clemmons Law Firm, we are committed and prepared to give instruction to those individuals in our community who will be impacted most by the implementation of these new mortgage disclosure statements and rules. Do not wait until August to make the changes you can make today. Whether you are a bank or a real estate brokerage, call Clemmons Law Firm today and we will help prepare you for the changes that await our industry in the coming months.

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