CFPB logo - New GFE Loan Estimate Changes for 2015November 20th the Consumer Financial Protection Bureau (CFPB) released a nearly 2,000 page document relating to RESPA disclosures and Real Estate Closings (If you have a month of free time click here to read). These forms are known as the “Know Before You Owe” mortgage disclosures. This final rule applies to all clients applying for and closing on residential mortgage loans.

The new rule mandates the use of a new three page “Loan Estimate” which replaces the Good Faith Estimate (GFE) and the Truth in Lending (TIL) Disclosure. There is also a new replacement for the HUD-1 Settlement Statement which is a five page document called the “Closing Disclosure“.

What is the new Loan Estimate form?

The new loan estimate form is a three page disclosure triggered when an application is made to a mortgage company. The Loan Estimate provides a summary of loan terms, loan costs, and other closing costs.

When does a client get the New Loan Estimate Form?

The mortgage company must provide the Loan Estimate within three business days of the client’s application. The new form must be given to the client at  least three business days before the loan closing (3 additional days if mailed) which is similar to the current regulations for mortgage disclosures.

Re-Disclosure of a revised Loan Estimate May Create Loan Closing Delays

In circumstances where the lender may need to provide a revised Loan Estimate, it cannot be provided on or after the date of the Closing Disclosure. The lender must provide the Loan Estimate at least three business days before closing of the loan (they may close on the fourth business day). Remember, this ONLY applies if a revised Loan Estimate needs to be provided.

What is the New Closing Disclosure Form for Real Estate Closings?

The new Closing Disclosure is a five page form that replaces the HUD-1 Settlement Statement and the final Truth in Lending Disclosure which provides a summary of the actual loan terms, loan costs, and all other closing costs.

New Closing Disclosure Waiting Period for a Real Estate Closing

The lender must provide the Closing Disclosure to the consumer at least three business days before the loan closing. If there are changes to the Closing Disclosure between when it is given to the client and the loan closing, another three business day wait period must be met before closing. Remember this rule is already in place for the Truth in Lending Disclosure so it is not a new wait period.

The numbers on the Closing Disclosure form must be as accurate as possible, however, the final Closing Disclosure must be updated with the actual numbers at close.

What changes would require Re-Disclosure of the Closing Disclosure Form?

There are three changes that would require a new Closing Disclosure be presented to the client.

  1. Changes to the loan’s APR greater than 1/8 percent (or ¼ percent for ARM loans),
  2. Changes to loan product (example FHA to conventional),
  3. The addition of a pre-payment penalty.

Does the Final Rule apply to All Mortgage Loans?

No. The final rule does not apply for home-equity loans, reverse mortgages, mobile home loans or creditors that make five or fewer mortgages per year. For additional information on the new forms and closing disclosures you are welcome to call a Riverbank Finance Loan officer at 800-555-2098 to review how it may affect your real estate closings.

Other Helpful Links

Compare Current GFE and HUD-1 Settlement Statement with the new Loan Estimate Disclosure and Loan Closing Disclosure (Before and After)

NOTE: Riverbank Finance LLC is not a government organization nor associated with or acting on the behalf of the a government entity. Information in the article should be used for illustration purposes only and not taken as legal advice. It is recommended that you speak with a competent attorney to review how the applicable laws will affect you.