The Consumer Financial Protection Bureau (CFPB), an independent agency of the U.S. government responsible for consumer protection in the financial sector opened its doors in 2011. Since that time, the organization has heard from homebuyers that the documents used in buying a home are overwhelming and confusing, and that they often lack adequate time to review them before signing on the dotted line.

Now that the CFPB’s new mortgage disclosure rules — Know Before You Owe — took effect on Oct. 3, 2015, you should feel reduced stress in understanding your mortgage documents.

The new Know Before you Owe rules represent a significant change in the mortgage production process designed to help consumers understand their loan options and avoid surprises during closing.

Here’s what will change:

Prior to Oct. 3, consumers received four documents between application and closing — a Good Faith Estimate (GFE), a Truth-in-Lending Act (TILA) disclosure, a HUD-1 and a closing TILA document. The CFPB streamlined these four overlapping documents into two forms — the Loan Estimate and the Closing Disclosure.

Under the new rules, the lender must provide the consumer with the Loan Estimate no more than three business days after the loan application is submitted. The Loan Estimate shows the amount of the loan and the interest rate, the monthly payment, estimates of taxes and insurance, and the amount of cash required to close.

You also will have more time to review your Closing Disclosure. Prior to Oct. 3, lenders gave consumers their HUD-1 settlement statement disclosure 24 hours in advance, if requested. Otherwise, the document often was provided at closing. Now, you’ll automatically receive your Closing Disclosure no less than three business days before the scheduled closing date.

How will these changes improve the mortgage process?

The rule changes ensure you have adequate time to review the Closing Disclosure and ask your lender any questions you have about the terms of your mortgage. Perhaps most importantly, the new forms make it easier for you to determine if the loan at closing is the same one you were promised because you will literally be able to line up the Loan Estimate and Closing Disclosure to compare them. At First National Bank, we applaud efforts to make the loan process more transparent.

Consumers also will experience fewer changes to their loans because the new rules prohibit lenders from making “substantive changes” without triggering new closing disclosures and another three-day review period.

Are there any drawbacks?

While these changes are positive, the required review periods mean more time is added to the process and it’s a good idea to err on the side of caution and increase your rate lock period. In addition, major changes to the terms in a mortgage may push back the closing since the changes will require another three-day review period.

Rely on us

Our experienced lending staff prepared for months in advance of the new disclosure rules and you can feel secure that we are committed to keeping you informed and helping you navigate the changes painlessly. We will help you determine which rate lock is in your best interest and whether you have an adequate cushion. We will advise you of potential delays that may impact your closing so you can ensure a seamless transition to your new home. First National Bank is a local community bank, made up of local lenders who make local decisions, so we are able to respond to changes quickly to keep your loan on track. When you work with us, you can feel confident that your mortgage is being handled by people who live and work in the same communities you do!

Contact one of our experienced mortgage professionals today to learn more about how these disclosure changes affect you.

November 2015