How Closing Processes Will Change August 1, 2015

What You Need to Know by August First Regarding Title Closing Processes

There are about to be some large changes in the closing process thanks to the Real Estate Settlement Procedures Act (RESPA), which take effect August first. The act aims at providing consumers with greater insights into settlement costs and helps to reduce the costs of closing by eliminating referrals and kick-backs.

While a number of the changes affect the kinds of forms used, eliminating many of them and replacing them with new ones, there are also many changes to the closing procedure.

Here’s what you need to know:

These changes were brought about because of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These changes will provide the buyer with more information and improving the settlement process for them.

• The closing disclosure must be given to the buyer three days before closing.
• If changes of the closing disclosure form are needed after it is presented, the changes are not as easy as merely updating a form.
• If one of the parties changes the interest rate on the form or specifics about the loan, it would require giving the buyer another 3-day disclosure period.
• Other changes may involve lender approval. This may add additional time to the process because that lender may not be at the closing.
• Sellers will need to abide by the original agreement in a much stricter sense and not make last-minute changes to the documentation because that would require changes in the settlement statement, which would involve going back to the lender and delaying closing.
• Walk-throughs will need to be conducted earlier so that if there is a change, there is enough time to accommodate it. While this is not a requirement introduced by the act, it is necessary so that the change needn’t involve the lender and needn’t be disclosed, or affect the closing documents. An earlier walk-through will help avoid a delay at closing.
• Referrals are gone. Before RESPA companies could receive money for referring customers to their preferred settlement partners. Who do you think shouldered those fees? The consumer. RESPA dictates “No one may give or accept anything of value for the referral of settlement services in residential transactions involving a mortgage.”  Some banks have already been fined for this sort of behavior. At Bay National Title, we’ve always been independent so referral fees haven’t been added to your costs.

These changes are aimed at improving the settlement process for consumers but it also may lengthen it. Because of the disclosures necessary, the paperwork and information will need to be ready earlier and may push your settlement date out fifteen or so days from what you experience now.

The good news is this will provide greater transparency in the process, tighter communications among all parties, and increased time to review information. At Bay National Title Company, we’re excited about the changes because we’ve been placing customer needs first since we opened our doors. Communication has been a priority of ours since day one.

We’re glad the rest of the industry is catching up.