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Know Before You Owe

Friday, October 2nd, 2015

So do you know about the Know Before You Owe program?  If you plan to buy a home after October 3, 2015 you’re going to learn.  The program is an attempt to help the consumer by simplifying the forms, and the information contained therein, provided to the mortgage consuming public.  The Consumer Financial Protection Bureau has done away with the HUD-1 and the Final Truth-In-Lending Forms and replaced them with the “Loan Estimate” and the “Closing Disclosure” forms.  Much of the information remains the same, but the presentation and organization is more user friendly and provides more detailed information.

Perhaps the biggest change, and perhaps the biggest obstacle (keep reading), is the timing requirement of the Closing Disclosure.  For those who have purchased a home with a mortgage you’ve undoubtedly been in the situation where the first time you see the “Final” versions of these documents is at best the night before closing and many times it’s actually at closing, though you’re entitled to the information twenty-four (24) hours prior if you request it.  The new rules require the Closing Disclosure to be provided at least three (3) business days before you finalize the loan, giving you time to review how the final numbers compare with the estimates and giving you the opportunity to ask questions. Here’s the issue…

Guess what happens if you notice a material error in the documents?  Well a new three-day review is possible, thereby pushing your scheduled closing date back, resulting in a possible domino like effect of requiring you to reschedule your movers, your time off from work, the utilities transfer and oh-my-gosh (if you have kids) the cable installation.  The concerns about what were considered material changes, which were not clearly defined, caused realtors and mortgage brokers to push back a bit.  Now, the Consumer Financial Protection Bureau has since come out to state there are only three changes which would require a new three day review: an increase in the APR, the inclusion of a prepayment penalty or a change in the loan product (fixed rate to adjustable rate).

Certainly, more time to review such important documentation is not a bad thing, but beware if there are material changes call Comcast immediately to make sure they are available for your new move date, otherwise deal with the wrath of your children!

Now you know a little bit about Know Before You Owe and knowing is half the battle.