The Consumer Financial Protection Bureau, a federal agency dedicated to protecting consumer in a number of complex types of transactions, including obtaining home mortgages, has issued new federal regulations in what is known as the “Know-Before-You-Owe” rule. One of the more significant impacts is the change to loan documents. 

The Good Faith Estimate and Truth-in-Lending Act disclosure are now called the “Loan Estimate.” The final Truth-in-Lending Act disclosure and the HUD-1 Uniform Settlement Statement have become the “Closing Disclosure.”

The Loan Estimate will include association-related costs, such as assessments and transfer fees. The mortgage lenders must provide the loan applicant a written Loan Estimate within four (4) days of the loan applicant’s request and the lender must provide the Closing Disclosure three (3) days prior to loan closing. 

Lenders are permitted to use a “best-information-available” standard when providing information to borrowers on the Loan Estimate. In other words, while the loan application is pending the information that lenders receive from various sources including associations and management companies can be an estimate based upon available information, but is not guaranteed to be accurate. In contrast, the information provided for use in the Closing Disclosure, such as the amount of assessments owed, must be entirely accurate. 

More information on the new legislation and lender requirements can be found at: 

www.consumerfinance.gov/knowbeforeyouowe

www.caionline.org/govt