Three Days In Housing Hell
As you all know by now, starting in August remodeled closing statements will have to be received by buyers three business days before a mortgage loan is consummated. Recently, Richard Cordray told a gathering of realtors that the closing industry has nothing to fear from this requirement. As someone who has criticized this mandate I want to give you the other side of the argument before I explain why the Director’s response is about as misguided as the Patriots’ defense of Tom Brady.
He explained that:
“The three-day requirement should not interfere with a successful closing, as some have claimed. In fact, there has been some serious misunderstanding about what kinds of major changes would cause a delay of the closing date, so I want to take a moment to clear that up right now.
The timing of the closing date is not going to change based on any problems you discover with the home on the final walk-through, even matters that may change some of the sales terms or require seller’s credits. On the contrary, we listened carefully to your concerns and limited the reasons for closing delays to only three narrow sets of circumstances: (1) any increases to the APR by more than 1/8 of a percent for fixed-rate loans or more than 1/4 of a percent for variable-rate loans; (2) the addition of a prepayment penalty; or (3) a change in the basic loan product, such as moving from a fixed-rate loan to a variable-rate loan. That is it. We recognize that various other things can and do change in the days leading up to the closing, so the rule makes allowances for those ordinary changes without delaying the closing date in ways that neither the buyer nor the seller may be able to accommodate very easily.”
This is one that the Director and I are going to have to agree to disagree on. The logistics involved in implementing this proposal are a mess. A member is presumed to have received a closing disclosure three business days after it is delivered or placed in the mail. For example If you are using snail mail-which is the safest way of complying with the three day requirement-and , you are open on Saturday and there are no intervening holidays you are going to have to get your closing statement out on a Thursday to close the following Thursday. Try working that out with your attorneys.
Major mathematical glitches occur and paperwork is misplaced When these occur and the closing is delayed because you got the paperwork out late or a serious problem is discovered at closing I would suggest letting your member vent by having them call the CFPB.
To its credit the CFPB has responded to legitimate concerns in the past. There are some commonsense compromises that it should implement (1) Create a same day presumption of receipt for all closing disclosures delivered by email where the member has explicitly agreed to accept these documents by email. As it stands now you can use email but the three days that the member needs to stare at the closing document don’t start running until receipt is acknowledged. I personally miss email all the time. (2)Create a next day presumption of receipt for overnight mail and (3) Authorize waiver of the three day requirement when a transaction must be completed within three days to provide funding for a subsequent home purchase.
The first two changes were considered but rejected by the Bureau when it promulgated these regulations. This last change would mean that no one is denied the house of their dreams because the federal government thinks it will be a good idea for them to stare at their closing documents for three days.