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Ask the Expert: What Do Changes Proposed By Consumer Financial Protection Bureau Mean for Real Estate?

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The Three-Day Rule
The three-day rule says that the Loan Estimate and Closing Disclosure must be in the buyers’ hands three business days prior to closing—whether delivered via secure electronic means or old-fashioned snail mail or courier delivery. Either way, the CFPB is eliminating the “surprise!” from the transaction process by ensuring loan docs and disclosures are delivered well before the closing. If charges change significantly, the proposed rule requires revised disclosures and another three business-day waiting period before closing.

Ability to Repay/Qualified Mortgage (QM)
The Bureau says most buyers will still qualify for the Qualified Mortgage (QM), but there’ll be more stringent underwriting requirements. The Ability to Repay rule details eight requirements for lenders to consider when underwriting loans, but does not dictate that they follow particular underwriting models. Lenders underwriting to a tighter standard of the “Qualified Mortgage” are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. Click here for a summary of both rules.

Quality Business Partners
Some of the biggest changes were announced in the April 2012 Bulletin from the Bureau, detailing expectations that lenders use high-quality service providers. With this requirement, real estate professionals may find that lenders are increasingly moving toward settlement providers with higher security and operational compliance standards.

The CFPB expects lenders to have processes for the following:
1. Conducting due diligence and verifying service providers understand financial laws
2. Obtaining service provider policies, procedures, internal controls and training materials
3. Including contract terms with clear expectations about compliance and consequences for compliance violations
4. Establishing processes to ensure providers are following all federal laws
5. Promptly addressing any problems found in the monitoring process, which may include terminating the relationship

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