Increased Consumer Protection Brings Changes in Real Estate Closing Procedures

Upcoming Changes in Real Estate Closing Procedures

Closing Disclosure Form & ALTA Best Practices

The real estate mortgage bubble has brought some changes to the real estate arena, but it seems the biggest changes are yet to come. The Consumer Financial Protection Bureau is replacing the long used HUD-1 Settlement Form with the Closing Disclosure form effective August 1, 2015.

The HUD-1 was a 3 page document that outline the closing transaction and was prepared by the Buyers attorney for closing, and was usually approved by the bank the day before or day of the closing. The Closing Disclosure form will be a reported 7 pages, will be prepared by the bank, and delivered to the closing attorney 3 business days before closing.

The result here is that lenders and attorneys need to become involved in the real estate transaction much earlier in the purchase process, and closing dates will be further out from the date of contract signing. Further, if any issues arise that require changes in the Closing Disclosure form, it will be at the lenders discretion whether changes are needed, and if they are, closing will need to be delayed by at least 3 days!

Further, since the new protections are creating more responsibility, and therefore liability, for the lenders, the lenders are requiring closing settlement attorneys to follow stricter guidelines. Many lender will be requiring that attorneys form and execute an ALTA (American Land Trust Association) Best Practices compliance guide, and if they fail to do so, they will not be able to close on loans from that lender.

Real Estate attorneys can no longer rely on “the way it has always been done”. The real estate closing procedures are changing, and attorneys need to adapt with them in order to properly represent their clients. Clients need to understand that the newer protections remove some of the control from the hands of the attorney, but that ultimately those requirements are there to protect the client.