The chief of the Consumer Financial Protection Bureau told real estate agents and broker to be prepared for the upcoming implementation of integrated disclosures.
CFPB Director Richard Cordray made the remarks
Tuesday to the National Association of Realtors, according to a prepared transcript of his presentation.
The real estate trade group is holding its
Realtor Legislative Meetings & Trade Expo in Washington until May 16.
Cordray said he’s been working with Realtors since 1992, when he served in the Ohio House of Representatives and teamed up with the state’s Realtor group on legislation.
Ohio experienced a foreclosure crisis in 2004 even though there was no recession and other economic characteristics didn’t point to foreclosure problems.
The culprit turned out to be Wall Street securitizations, which had
“thoroughly disrupted” the relationship between a borrower and a lender. Cordray said the effects from securitizations have lingered in his home state for more than a decade.
“We could not anticipate that it would spread to become a national epidemic that would cause a financial crisis and the worst economic conditions of our lifetime, bringing tough times for Realtors in particular,” Cordray said.
He
said that the sluggish housing market recovery is “largely independent of any regulatory effects.” He said warnings of a doubling of prices in mortgages and a one-half reduction in originations never came to be since the CFPB rules have been implemented.
Cordray highlighted the Know Before Your Owe rule, which
includes the integration of disclosures required under the Truth in Lending Act and the Real Estate Settlement Procedures Act.
The new Loan Estimate and Closing Disclosure will be required on Aug. 1.
Cordray
said the the three-day requirement for Closing Disclosures won’t be interfering with successful closings — despite claims by some.
“In fact, there has been some serious misunderstanding about what kinds of major changes would cause a delay of the closing date,” Cordray proclaimed.
He explained to the Realtors that the only reason a closing date would be delayed is if one of three situations arises.
The first is an increase in
the annual percentage rate of more than 12.5 basis points on fixed-rate loans or 25 BPS on adjustable-rate mortgages.
If a prepayment penalty is added, a delay would apply.
The third reason for a delay would be a change in the loan product, such as moving from a fixed rate to an ARM.
“That is it,” Cordray stated. “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.”
The director acknowledged the scale of the change for the industry.
But he said that most of the market players are prepared for the Aug. 1 deadline, while others are preparing.
“Yet we continue to receive a great deal of input on this issue, and as always we are listening closely in order to consider and assess that input,” Cordray said.
