More borrowers are taking a closer look at their mortgage documents before it’s too late, and more agencies are helping these borrowers understand what they’re getting into, well before new federal guidelines go into effect this fall, according to a recent survey [1] by the American Land Title Association [2] (ALTA), in conjunction with of the Mortgage Bankers Association [3] and National Association of Realtors [4].
The survey, which looked into 1,500-plus new home closings, showed that more homebuyers are reviewing their mortgage documents ahead of their scheduled closing, under new federal “Know Before You Owe” regulations that become mandatory as of October 3, 2015. Under the new regulations, the Consumer Financial Protection Bureau [5] (CFPB) requires homebuyers to receive a five-page closing disclosure at least three days before the closing of their mortgages.
Despite the October date, many mortgage servicers are already using the disclosure, and consumers are happily studying the information. According to ALTA, 92 percent of borrowers surveyed are using the disclosure papers, a big leap from the 74 percent who used to tunnel through disclosure information prior to the five-page breakdowns.
The survey did, however, show the continued need for all parties involved in a transaction to work together to ensure the consumer experiences a positive closing. According to the survey, consumers received valuable information about their transaction from loan officers (39 percent), title/settlement agents (30 percent) and real estate agents (29 percent), meaning that information for consumers is coming from a broad spectrum of professionals involved in the homebuying process.
“Fortunately, consumers continue to view title and settlement agents as valuable resources that provide peace of mind and help them get the keys to their home,” said Michelle Korsmo, ALTA’s chief executive officer.
This is not to suggest that homebuyers know all they need to know, nor that the CFPB has done all it’s could to make things clearer for borrowers. The survey, in fact, found that 12 percent of homebuyers in a purchase transaction using the closing disclosure were unsure if they had bought an owner’s policy. This compares to 8 percent of homebuyers who were unsure under the old regulations.
That said, Korsmo is generally positive on the future of the disclosure, once the bugs are worked out.
“While there remain challenges to complying with the regulation, title and settlement agents went to great lengths to prepare and train staff prior about the new process,” “she said.
The CFPB announced it would clarify and provide additional guidance on the rule this summer.