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What Realtors need to do

* Coach borrowers to get homeowners insurance at contract, since 90 percent of today's closing delays are caused by a lack of homeowners insurance.

Think about timing. Asking to delay appraisal until after the inspection may delay closing.

Advise sellers to make repairs as soon as possible and give access to inspectors and appraisers.

Source: Laura Perry, attorney and president of Homeland Title in Franklin, Tenn.

For more info

See the new forms and learn more about the reasoning behind them at www.consumerfinance.gov/knowbeforeyouowe/

The ride may be bumpy if you plan to buy or sell a house in the months after Oct. 3, when new federal rules take effect that are meant to protect consumers and prevent another sub-prime mortgage meltdown like the one that spurred the Great Recession.

That's according to Laura Perry, a title attorney and president of Homeland Title in Franklin, Tenn., who's been traveling the state to give free presentations to real estate professionals so they'll be aware of the coming changes.

"It's going to be a big deal," Perry said. "It's a big change, and it's going to be difficult.

"Overall, I believe the changes are going to be positive," Perry said. "I'm worried about whether or not transactions will slow over the next six months or so — on the other side of this, it's going to be great."

The changes mean that buyers, sellers and real estate professionals can "kiss goodbye" forms that have been around for years: the good faith estimate and truth in lending statement at the start of the mortgage process and the HUD-1 Settlement Sheet when a buyer closes. They'll be replaced with a loan estimate and closing disclosures.

"Our new disclosures are easier to understand and use than the existing disclosures," the federal Consumer Financial Protection Bureau (CFPB) says on a website that explains the change.

"To be sure, the loan estimate and the closing disclosure are easier to use and understand than the existing forms. We tested them in a quantitative validation study.

"Participants provided more correct answers about a sample mortgage using the new forms than they did using the current forms."

Fundamental terminology will change, too. Instead of a house sale concluding with a "closing," the transaction will now be referred to as a "consummation," under the new federal regulations.

Five-year snapshot

One new feature on the federal loan estimate form is a five-year snapshot of how much the buyer has paid.

In Perry's example of a $180,000 house, $56,582 was paid over five years for principal, interest, mortgage insurance and loan costs. Out of that, $15,773 went toward the principal.

"That's a more relevant number to today's borrower," Perry said, since borrowers these days who don't plan to spend 30 years in one house.

There was some grumbling among real estate professionals.

"It's definitely detrimental to our business. It will be for a while, because it's a complete change," said Nickie Schwartzkopf, principal broker for Re/Max Properties in Chattanooga.

The federal changes were made with the consumer in mind, said Bill Jones, of Jones and Raulston Title Insurance.

"It just changes the process a little bit," he said.

"It's really good in the end for consumers. It's a really positive thing."

Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or www.facebook.com/tim.omarzu or twitter.com/TimOmarzu or 423-757-6651.

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