CFPB Introduces New Tools for Buyers at NAR

September 18, 2015

With the arrival of new rules and forms that will rewrite the closing process just a few weeks away, senior officials from the Consumer Financial Protection Bureau (CFPB) joined National Association of REALTORS®’ 2015 First Vice President-Elect Elizabeth Mendenhall yesterday to unveil online tools designed to help consumers and agents navigate the Know Before You Owe initiative.

The implementation of the Truth in Lending Act – Real Estate Settlement and Procedures Act Integrated Disclosure rule (TRID), which the CFPB calls the Know Before You Owe initiative, is expected to bring sweeping changes to the real estate industry. It will merge the existing HUD-1 Settlement Statement, Good Faith Estimate, and Truth-in-Lending disclosure form into two new closing forms: a Loan Estimate and a Closing Disclosure.

The new online tools—included in the CFPB’s “Owning a Home” website—expand on a detailed brochure about buying a home that the CFPB introduced in March, and which the agency will require lenders to give to borrowers.

“When you as a consumer shop for a great home, you should also be shopping for a great mortgage loan, and with the same amount of care,” Gene Koo, the CFPB’s assistant director of consumer engagement, said during an event at NAR’s Washington offices. He added that the agency would like consumers to be able to compare mortgages as easily as they can learn about foods from nutrition labels. “We’re eager to get these resources into the hands of consumers, and we hope that you will use them yourselves and with your clients.”

The additions to the CFPB website include:

  • a guide to each phase of shopping for and obtaining a mortgage,
  • a detailed worksheet to help households calculate the cost of owning a home and determine what they can afford given their other expenses,
  • and an interactive look at new the Loan Estimate and the Closing Disclosure—the two forms they will encounter after the new closing rules take effect on Oct. 3.

CFPB Director Richard Cordray said the changes to the closing process and the accompanying educational efforts reflect his agency’s commitment to making home buying accessible to Americans while preventing the kinds of problems that led to the economic crisis that gripped the nation several years ago. “Our efforts here have centered on reducing the information gap between lenders, who understand mortgage pricing inside and out, and consumers, to whom the process can often feel like a mystery,” he said.

The reforms to the mortgage industry introduced by the CFPB have brought renewed health to the housing market—and made home ownership safer and more accessible, Cordray added. “It means more opportunity for more consumers, and a renewed pathway to the American dream, and a mortgage market that has been strengthened by the changes we have made.”

The CFPB also offers information geared to real estate professionals about the new rules and forms.

Cordray said predictions that the CFPB’s regulation of the mortgage industry would backfire did not come true, pointing to the Qualified Mortgage rule, which requires lenders to make sure prospective borrowers are in a position to repay a mortgage before closing the loan, as an example of how the agency has succeeded in its efforts to tame the lending business in the wake of the financial crisis.

“While we saw minor consolidation in some parts of the mortgage market, there’s no evidence of any mass exodus, as the 'doomsayers' predicted. In fact, after adjusting for merger activity, the number of lenders that reported having originated mortgages showed an increase in 2014,” and more community banks and credit unions are reported that they originated mortgages, Cordray said.

Cordray also said there is no reason to believe that the new closing rules will result in a rash of home sales that are scuttled just before the deal is concluded. “Some have been spreading misinformation about this point, claiming that last-minute changes based on walkthroughs or similar circumstances will cause frequent three-day delays in the closing process. That is simply wrong.”

Instead, Cordray emphasized that the new rules mandate that a lender issue a new Closing Disclosure—and give the borrower three days to review the form—only when the loan product changes, the interest rate increases beyond a prescribed amount, or a pre-payment penalty is added.  The changes “will reduce paperwork, remove confusion, and make the process more transparent – all changes that will help promote home sales, not hinder them,” he said.

Video of CFPB Director Richard Cordray’s remarks at the REALTOR® building in Washington on Sept. 17:

NAR 2015 First Vice President-Elect Elizabeth Mendenhall interviews CFPB Director Richard Cordray in this video:

—By REALTOR® Magazine