The CFPB is Changing All the Rules This August

The CFPB is Changing All the Rules This August
The CFPB is Changing All the Rules This August
On August 1, 2015, the way lenders, realtors, and title companies work together will change completely.
If you are not prepared for the upcoming changes, you will run the risk of delayed closings, lost trust
with customers, or other challenges brought by new federal regulations. Those statements might seem
dramatic, but everything in the closing process—from the timing of the transaction to how information
is shared, and to what language we use when closing—will change later this year. Preparing now will
ensure that you remain relevant, and that you’ll have the best tools for gaining and retaining customer
After the mortgage meltdown of 2005-2008, the Dodd-Frank Act created the CFPB with the express
purpose of protecting the consumer. One directive of the CFPB was to simplify and improve customer
understanding of the closing process. The Dodd-Frank Act required the CFPB to combine separate,
federally mandated forms used in the closing process (the Truth in Lending form, Good Faith Estimate
form, and HUD-1 form) into one easy-to-read document. The logic behind this consolidation is that one
form is much easier for the consumer to understand.
The CFPB’s attempt to simplify the closing process is admirable; however, the changes are wreaking
havoc on the lending and closing industries. The new forms require software updates, for title
companies and banks to work together in lockstep, and for real estate contracts to take into effect the
new closing timeline.
The days of the last-second closing with a lender involved are gone (sort of). For title companies, the
new regulations are welcome, as they should improve customer service dramatically. As humans tend to
do, many lenders procrastinate until the very last second before closing. The CFPB recognized this lastsecond closing push, and determined that consumers did not have enough time to review relevant
documents and ask educated questions.
To fix this issue, the CFPB proposed a “Three Day Seasoning Period” before closing. However, in the
world of government math, three days really means seven days. This is a critical point, and one that all
parties to the transaction should understand. Let’s add it up:
3 Days – The CFPB mandate for consumers to review their loan information.
3 Days – The CFPB mandates that forms must be delivered to the consumer. Generally,
most lenders will mail forms for security and consistency. If mail is used, then the
government allows three days for delivery.
1 Day – The lender, realtor, and title company will agree on final forms.
Add up those days, and the seven days before the actual closing—lenders, realtors, and title companies
will be scrambling to finalize closing documents. The industry will move to a “pre-close” seven days
before the actual closing. This new process, while more cumbersome, will be welcome as the final
presentation of the documents will be much more organized. The seven-day closing rule is critical to
remember when completing real estate contracts and scheduling closings.
This may seem a bit comical, but the CFPB is trying to change the way we talk about our business. Here
is a quick vocabulary lesson:
“Closing” is now to be called “Consummation”
“Lender” is now to be called “Creditor”
“Customer” is now to be called “Consumer”
The “HUD” will now be called the “Closing Disclosure” (CD)
I laugh a little when I envision the corporate compliance officer trying to train our staff on the new
vocabulary. Traditionally, we schedule a “closing” with a consumer. Now, title companies and realtors
will schedule a “consummation” with the consumer. (That could be an odd and awkward conversation
with consumers that do not know the new CFPB lingo.)
Many steps can be taken to prepare for these new adjustments. First and foremost, educate yourself,
your staff, and your customers. The more you know about the new regulations, the better prepared and
confident you will appear to be with your consumer. Look for upcoming educational opportunities, and
attend as many as possible to learn about the changes. Next, train your staff and ensure they
understand that the process will change on August 1, and that they are prepared for the changes.
Ensuring that your team as a whole is ready will prevent unnecessary delays or embarrassing oversights.
Finally, partner with vendors that understand the upcoming changes. Avoid working with vendor
partners that do not have knowledge or seem to think the changes are not that big of a deal. All of the
rules are changing this August, and we need to be prepared!
Patrick W. Curry is the CEO and President of WACO Title Company. WACO Title Company has a footprint
consisting of 17 offices that extends from Springfield, MO, to Little Rock, AR. He can be reached via email
at [email protected]