The Rules Are Changing (OPINION)

On Aug. 1, the way lenders, Realtors and title companies work together will change completely.

 If you are not prepared, you run the risk of delayed closings, lost trust with customers, and more. This statement might seem dramatic, but the new federal regulations will impact everything from the timing of the transaction, to information-sharing procedures, to what language we use.  Preparing now will ensure that you remain relevant, and that you’ll have the best tools for gaining and retaining customer relationships.

After the mortgage meltdown of 2005-2008, the Dodd-Frank Act created the Consumer Financial Protection Bureau with the express purpose of protecting the consumer. One of the bureau’s directives was to simplify and improve customer understanding of the closing process. The Dodd-Frank Act required the CFPB to combine separate, federally mandated forms used in the closing process into one easy-to-read document.

The attempt to simplify the closing process is admirable, but the changes are wreaking havoc on the lending and closing industries, with the new forms requiring them to get software updates, for title companies and banks to work together in lockstep, and for real estate contracts to take into account a new closing timeline.

Timing

The days of last-second closing with a lender involved are gone (sort of). For title companies, the new regulations are welcome, as they should dramatically improve customer service. The CFPB recognized a last-second closing push, caused by procrastinating lenders, and determined consumers did not have enough time to review relevant documents and ask educated questions.

To fix the issue, it proposed a three-day “seasoning period” before closing. However, in the world of government math, three days really means seven. Let’s add it up: three days to allow consumers to review their loan information; three days for delivery, if by mail, as the CFPB mandates forms must be delivered to the consumer; and one day for the lender, Realtor and title company to come to an agreement on final forms.

Lenders, Realtors and title companies will be scrambling to finalize closing documents, and the industry will move to a new, more cumbersome, pre-closing system. 

The new process will be welcome, as the final presentation of the documents will be much more organized. However, it is critical to remember the seven-day closing rule.

Language

This part may seem a bit comical, but the CFPB is also trying to change the way we talk about our business.

Here is a quick vocabulary lesson: a “lender” will be called a “creditor,” the “customer” will be called the “consumer,” the “HUD” form will become the “Closing Disclosure,” and “closing” will be called “consummation.”

I laugh a little when I envision the corporate compliance officer trying to train our staff on the new vocabulary. Traditionally, we schedule a “closing” with a consumer. Now, title companies and Realtors will schedule a “consummation” with the consumer. (That could lead to an odd and awkward conversation with consumers who do not know the new CFPB lingo.)

Preparation

Many steps can be taken to prepare for these new adjustments. First and foremost, educate yourself, your staff and your customers. Look for upcoming educational opportunities. The more you know about the new regulations, the better prepared you will be and the more confident you will appear with your consumer.

Ensuring your whole team is ready will prevent unnecessary delays or embarrassing oversights.

Finally, partner with vendors that understand the upcoming changes and avoid those who do not have knowledge of the new rules or think they are unimportant. All of the rules are changing this August, and we need to be prepared. 

Patrick W. Curry is the CEO and president of Springdale-based Waco Title Co., which has a footprint consisting of 17 offices extending from Little Rock to Springfield, Missouri. He can be reached at [email protected].