1. CFPB AND THE REO TRANSACTION
What You Need to Know Before you Close
August 20, 2015

2. CFPB – Know Before You Close
Be able to explain the new loan Estimate and Closing Disclosure After the 2008 financial meltdown, Congress established the Consumer Financial Protection Bureau (CFPB). Among its first tasks was the combination of forms provided to borrowers at both the beginning and end of their loan transaction. In 2013, CFPB published its final rule, revealing these two new combined forms.
Currently, borrowers receive two separate forms from their lender at the beginning of the transaction: the Good Faith Estimate (GFE) and the initial disclosure required under Truth in Lending Act (TILA). For loan applications taken on or after August 1, 2015 the creditor will use a combined Loan Estimate form intended to replace the two previous forms.
With the HUD-1 Settlement Statement and the final TILA fors now combined into a single Closing Disclosure form, the new five-page form is used not only to disclose many terms and provisions of the loan, but also the financial transaction of the closing of the sale.

3. CFPB – The New Forms Being Introduced
Any residential loan originated on or after October 3, will be subject to the rules and forms set for the by the CFPB. New regulations issued under the new rules will be enforced February 1, 2016
The Rule replaces the Good Faith Estimate (GFE) and early TILA form with the new Loan Estimate
It also replaces the HUD-1 Settlement Statement and final TILA form with the new Closing Disclosure
Currently, borrowers receive two separate forms from their lender at the beginning of the transaction: the Good Faith Estimate (GFE) and the initial disclosure required under Truth in Lending Act (TILA). For loan applications taken on or after August 1, 2015 the creditor will use a combined Loan Estimate form intended to replace the two previous forms.
With the HUD-1 Settlement Statement and the final TILA fors now combined into a single Closing Disclosure form, the new five-page form is used not only to disclose many terms and provisions of the loan, but also the financial transaction of the closing of the sale.

4. What does a REO Real Estate Broker Need to Know Before August?
Timing of closings are heavily impacted by the disclosure delivery rules
You should be able to explain the new Loan Estimate and Closing Disclosure
Title fees may need to be adjusted at closing and explained
Line numbers have been removed and there are now 7 fee areas on the Closing Disclosure
The buyer will likely receive more than one Closing Disclosure
Buyers should not expect to make any changes at closing (repair credits)
Sellers should not do anything that would require changes at closing

5. The New Closing Disclosure
Page 1.
Loan terms
Loan amount
Interest rate
Monthly P&I
Any prepayment penalty or balloon payment
This page also provides the projected payments
over the life of the loan and discloses to the
borrower what amounts will be deposited into
their impound account. Page 1 provides the total
Estimated closing costs and cash to close.

6. The New Closing Disclosure
Page 2.
The second page is similar to the current Page 2
of the HUD-1 Settlement Statement. It provides
a breakdown of all the closing cost details and lists all
loan costs and other costs paid by borrower, seller and
other parties.

7. The New Closing Disclosure
Page 3.
The third page displays a Calculating Cash
to Close table which provides a comparison
To the charges disclosed on the Loan Estimate.
This page also shows the summaries of the borrower
and Seller costs and credits, similar to the current
Page 1 of the HUD-1 Settlement Statement.
Pages 2 and 3 are the pages that will be closely reviewed
by the REO Broker, the Seller and the Seller’s attorney.

8. The New Closing Disclosure
Page 4.
The fourth page contains disclosures about other
Terms of the loan, including:
Whether the loan is assumable
If the loan has a demand feature
May impose a late payment fee and when it’s incurred
If the loan has negative amortization feature
Whether the lender will accept partial payments
Informs the borrower the lender will have a security
interest in their property
The page also includes a table describing what charges
will be impounded and how much will be collected each
month. Page 4 also includes adjustable payment and
Interest rate tables if they are applicable to the loan.

9. The New Closing Disclosure
Page 5.
On the fifth page under the heading “Loan Calculations:
the consumer will find the:
Total of payments over the life of the loan
Finance Charge
Amount financed
Annual Percentage Rate (APR)
Total interest percentage information
Under “Other Disclosures” the consumer will find:
Appraisal (if applicable)
Contract details
Liability after foreclosure
Refinance information
Tax deductions

10. How will the closing timeline be impacted?
REO CLOSING TIMELINE
Creditor provides Loan Estimate to Consumer
Consumer indicates an intention to proceed with Application
Copy of Real Estate Contract received by Creditor
Title Insurance product is ordered/updated and amounts disclosed to Creditor
Appraisal is Ordered
HOA Documents are ordered for early procurement necessary for Closing Disclosure

11. How will the closing timeline be impacted?
REO CLOSING TIMELINE
Creditor verifies costs for any necessary changes on the loan Estimate
All transfer taxes, HOA Dues, municipal liens, closing cost or repair credits and all other costs affecting closing must be provided to lender for accurate loan disclosure
Closing Disclosure prepared and delivered to consumer
Consumer must receive the Closing Disclosure no less than 3 business days prior to the consummation. If any changes must be made, the 3 day time period will start over
Consummation of Closing takes place
Disbursements may occur for purchase transactions

12. Sample Timeline

13. Sample Timeline

14. Sample Timeline

15. The New Role of the Settlement Agent
On preliminary and final Closing Disclosure, title policy costs are not shown as before
Final HUD-1 is NOT executed. It is replaced with the Closing Disclosure
Closing Disclosure must be prepared and delivered by lender or settlement Agent to buyer no less than 3 business days prior to closing
Settlement Agent will prepare and deliver to Seller the Sellers Disclosure on or before the day of consummation.
Last minute changes that require re-disclosure:
Changes that have the effect of increasing the APR by more than 1/8th of 1%
Changes that have the effect of changing the loan product
Changes that add a prepayment penalty to the loan

16. What Do Real Estate Brokers Need to do to Prepare for the Changes in the Process?
The Real Estate professional is an initial consumer touch point with a critically important role.
You are in a great position to support consumers by:
Being well trained and informed on the new regulations and documentation
Being an active participant and effective communicator in the transaction timeline
Remembering the importance of timing and accuracy when negotiating contracts, closing cost credits and municipal or HOA payoffs
Interfacing Effectively with Consumers
Work Closely with lender and title professionals for consistent information to the consumer.
Make sure there are regular updates between the parties
Know who to contact at the lender
Don’t seek to alter planned closing dates without good advance notice and consideration

17. THANK YOU FOR ATTENDING!