Three Effects of Simplified Mortgage Disclosures

John Neil

By John Neil

Real estate agents working to close a sale must work in conjunction with the mortgage lender, title company, movers, employers, etc. Changes in one arena impact the whole, so it is certainly useful to take a holistic view.

This is particularly true now more than ever. Federal changes impacting the consumer mean that “mortgage lenders and title companies may be more actively seeking your input for a timely closing – because you are the primary link to the consumer,” explains Vicki White, senior vice president with TitleOne in Boise.

Understanding the New Rules Recently the Consumer Financial Protection Bureau (CFPB) issued changes relevant to obtaining a mortgage, ranging from more stringent privacy policies to simplified consumer disclosure rules effective Oct. 3, 2015. Designed to help consumers understand what they are buying when they obtain a mortgage, the two new disclosures (one at the front-end and one at the back-end) help make comparison shopping easier; require upfront communication and full transparency; provide strict post-application and pre-closing timeframes; and eliminate surprises at the closing table.

For real estate agents, three considerations around these changes can prepare you for potential growing pains and help your own operations run smoothly.

#1– Relationships Matter, Even More

The new front-end disclosure, called the loan estimate (LE) integrates, reorganizes and replaces the good faith estimate and the truth-in-lending disclosures. It is easy to understand and identifies the exact type of mortgage being offered. It must be delivered three days before your clients agree to proceed with obtaining the mortgage. Additionally, no fees can be charged (other than a nominal fee to pull a credit report) until the consumer has acknowledged the disclosure and agreed to the terms.

For real estate agents, some elements of day-to-day business may be affected:

  • Value-add for clients: Consumers will be in the driver seat a bit more now and may feel more confident about assessing a mortgage. Still, helping them navigate the process can provide clarity.
  • Lender relationships: It will be easier for consumers to comparison shop, even online. Assuring them you work with a known lender – who understands the regulations – can be instrumental in overall efficiency.

#2 –You are an Essential Link in the Process

The new rules are much more restrictive and offer very little allowance for changes or errors. “Lenders and title companies may ask you to provide information that they may not have normally needed,” says White. “Since there can’t be any changes at the last minute without triggering a new waiting period, more follow-up will be required up front.”

  • Keep “change in circumstance” in mind. The new rule has tolerances for certain fees. Some situations have zero tolerance; others require a change in fee to be a qualified “change in circumstance” that increases the fee by 10 percent (or the lender absorbs it); and some allow for unlimited changes. It is important to understand what causes a qualified “change in circumstance” and the delays it presents by requiring new disclosures to be sent to the borrower.
  • Explain the urgency to your clients. With added regulation and extended waiting periods it is critical that your clients are prepared prior to purchase and respond quickly to requests from their lender or title company. “If for some reason there is a delay that requires everyone to be re-notified and delays closing for three days, the seller may have another offer – maybe even a better offer,” cautions Barbara Dawson, associate broker with Group One Real Estate in Boise.

#3 – Time Really Will Be of the Essence

The closing disclosure (CD) reorganizes information previously disclosed on the HUD-1 settlement statement. The form has been changed to look similar to the LE, making it easier for your clients to compare the mortgage they were offered with the one they are getting at closing.

For real estate agents biting their nails during closing, the CD should help. Here’s why:

  • Less financial risk of a client backing out at closing. Strict tolerances for differences between amounts disclosed on the LE and amounts disclosed on the CD, make the lender liable for any amount exceeding the prescribed tolerance. This will protect your clients from surprises.
  • The timing of a closing can be better scheduled. Strict timing requirements for the delivery of the CD – three days prior to signing with absolutely no exception – forces adjustments to how and when closings can be scheduled. This will necessitate coordination between all the parties.

The new TILA-RESPA integrated disclosure (TRID) rules present information in an organized manner that will be easy for your clients to digest. Keep in mind, however, that some of the practical applications of these new disclosures and the tolerance for errors may affect mortgage timing. Most lenders will be extra cautious when providing mortgages after Oct. 3, so as not to be out of compliance. But rest assured knowing that after the initial learning curve, we expect to sail to the closing table with you.


John Neil is the Idaho mortgage sales manager at Bank of the Cascades. A 21-year veteran of the mortgage industry, John manages a growing team of mortgage loan officers throughout Treasure Valley. Responsible for recruiting, training and developing top talent, John has been instrumental in developing construction, land and lease financing options. John received his bachelor’s degree from Boise State University and is actively involved in the local community including Kuna High School Football Boosters, Noon Optimist Football and the Boise State University Alumni Association. You can reach John at (208) 319-2431 or by email at jneil@botc.com.