The Consumer Financial Protection Bureau (CFPB) on June 3 issued a weblog post addressing new mortgage disclosure rules which go into effect August 1. The post suggests the CFPB will soon release an announcement detailing a good faith grace period for enforcement by the relatively new federal bureaucracy against mortgage lenders and servicers for violations.
Under federal law beginning with loan applications submitted after July, a new closing disclosure form will replace existing consumer disclosures such as the truth-in-lending form, HUD-1 settlement statement and good faith estimate. The CFPB has issued hundreds of pages of regulation dealing with the so-called Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Disclosure (TRID). The new form will have to be provided at least 3 days in advance of the real estate closing. Changes in closing costs may require re-disclosure and restarting of the 3-day period.
Although these new rules were ostensibly designed to protect the mortgage finance consumer, they will invariably add confusion and frustration to the still-fragile housing and mortgage markets, delaying purchases and mortgage refinances and driving up transaction costs. Borrowers, regardless of whether they have good credit, sufficient home appraisals and other favorable underwriting characteristics, will ultimately be the ones footing the bill for this new federal regulation once it goes into effect.