Amber Dawson – October 3, 2015 marked the beginning of substantial changes to the transactional process of residential home buying. In 2013, the Consumer Financial Protection Bureau (CFPB) announced finality of a federal mortgage initiative, which the agency hopes will ensure that residential real estate purchasers are more informed before securing loans. The CFPB hopes the implementation of these new rules will make the home buying process more transparent and fair for consumers.
The CFPB began drafting these legislative changes in 2011 in response to the housing crisis. Now, under the Truth In Lending Act and the Real Estate Settlement Procedures Act, new disclosures will be implemented for all real estate transactions requiring the securement of a mortgage before closing. The two new disclosure forms, which are required to be completed for consumers at least three days prior to closing, will combine and replace the previous disclosure forms required under the acts, which were considered confusing and complicated by many.
What does this mean for potential homebuyers? The government hopes that borrowers will be more informed and less likely to lose their homes in short sales or foreclosures, as many did in the housing crisis. Once the two new closing disclosure forms are given to the borrower in any given real estate transaction, the borrower will have three days to review the disclosures and ensure that they are securing mortgage loans with terms they fully understand. Additionally, lenders are now required to provide borrowers with loan estimates within three business days of the borrowers’ application for a mortgage.
Although the confusing and overlapping current mortgage disclosure forms are often not seen by borrowers until the day of closing, how much do mortgage-securing home buyers need to know before they owe? The answer to this question seems to be as much as they possibly can to ensure Americans won’t have to live through another subprime mortgage crisis in their lifetime. Financial fraud and, more specifically, mortgage fraud not only led to the housing crisis but also gave way to the recession of 2007-2009.
Throughout the duration of that recession, consumer spending decreased drastically, banks were less inclined and less able to lend money to borrowers, and the prices of homes fell drastically. By ensuring that borrowers are reasonably informed before entering into a new mortgage, borrowers will be more knowledgeable about the terms of their home loans and, hopefully, less susceptible to fraud. In a time when financial fraud has had a substantial negative impact on the daily lives of Americans and our nation’s economy, transparency means everything. At this time, the Financial Fraud Enforcement Task Force is ready to combat mortgage fraud, and the CPFB is there to help you.