One of the most frustrating things in the mortgage business is the last minute rush closing. A client might be closing on a Tuesday and not know the exact amount needed at closing until that morning. That is just unacceptable. I have been in the mortgage business 28 years and finally it looks like this is going to change. Starting August 1st the CFPB (Consumer Financial Protection Bureau) is implementing a new policy where the borrower will see the HUD1 (settlement statement) at least 3 days before closing. The HUD1 will now be called the ‘closing disclosure’. This will force everyone including the lender, the attorney, and the realtor to be more proactive. I applaud the CFBP for making this change. While I’m not jumping up and down at everything the CFBP does, this might be their best idea.
Who’s to blame for all the last minute items that pop up at closing? Below is a list of the culprits and some examples:
The lender: The lender is king of last minute. Basically, anyone that has gone through the mortgage process can relate. There are 2 big issues I see with the lenders. The first are the conditions. Since the mortgage meltdown in 2008 the conditions have gotten ridiculous. The lender wants everything and the lender trusts no one. I understand to a certain point. They are lending large sums of money and it’s their right to make sure the loan will perform. But currently they are over the top. The 2nd issue is the lender’s process. The closer does not get the file until the loan is CTC (clear-to-close). And guess what? That’s usually last minute. This new rule will force the closers to get involved earlier.
The attorney: I can not tell you how many transactions we’ve had where the file is with the closer a week before closing, the package and instructions have been sent to the attorney, and the attorney waits until the day before closing to open the package. This will no longer be the case.
The realtor: The NAR is obviously aware of this new rule and I believe has either started training or has it scheduled. One of the things I saw on the NAR web-site that will possibly be changing are the walk throughs. The talk is to make these at least 7 days before closing. I believe that’s a good idea. The other issue we’ve run into is that the realtor will make a change to the contract and not send the addendum to the lender or the attorney. Lets say after the inspection that the price is reduced. The day of closing the addendum appears and delays closing because all the figures are incorrect. Hopefully this will no longer happen because everyone will see the closing statement at least 3 days before closing.
There are more things being implemented August 1st by the CFPB but this is the one that I see as a must.