Lender/Settlement Agent Regulatory Alert: Nov. 6 Deadline to Prevent Proposed CFPB Disclosure Rule From Delaying Closings

by Rich Vetstein on November 4, 2012 · 2 comments

in Closings, Consumer Financial Protection Bureau, Disclosures, HUD, Massachusetts Real Estate Law, RESPA, Truth in Lending

Mandatory 3 Business Day Waiting Period Will Delay Closings

Action Needed: Comment On Proposed Rule

While our attention has been diverted from more important issues such as Hurricane Sandy and the election, please be advised that November 6, 2012 is the last day for lenders, settlement agents, Realtors and the public to comment on the controversial new combined Truth and Lending/HUD-1 Disclosure rules proposed by the new Consumer Financial Protection Bureau (CFPB). For those who don’t know, the CFPB has proposed a major overhaul to closing disclosures, combining the Truth In Lending and the HUD-1 Settlement Statement into a single 5 page disclosure form.

Of paramount concern to the real estate community is the proposed Three Business Day Rule, which would require that lenders provide the final Closing Disclosure (the new HUD-1) at least 3 business days prior to the closing. The major problem with this rule is that if there are changes in settlement and closing figures between the time of disclosure and the closing, the consumer must be provided a new form, and the closing must be delayed for at least 3 business days. ((There is an exception for adjustments between buyer and seller, such as a repair credit and for items under $100.))

In today’s lending environment, last minute changes to settlement numbers are common, and given the crush of underwriting tasks, final closing figures are typically provided 24-48 hours prior to the closing, or even the day of closing. Moreover, there are often delays getting information from outside sources — real estate tax information from municipalities, insurance information from independent agents, final water/sewer readings, oil bills and 6d condo fees from Realtors, and payoffs from sellers — all of which are out of the control of the lender and the closing attorney.

If there are last minute changes to settlement numbers, the proposed rule will delay closings for at least 3 business days, which could be catastrophic. This will have an unintended ripple effect on both the borrower and other parties, especially where the borrower is doing a “sell-buy” on the same day.

The CFPB is out of touch with the real estate industry on this rule. Indeed, at a recent symposium on the new rules, the CFPB’s new general counsel was reported as being very surprised that last-minute changes in settlement figures were relatively common. Delaying closings for 3 business days through delays of no fault of the lender or settlement agent hurts all the parties to the transaction. The rule is regulatory overkill.


Tell the CFPB that the 3 Business Day Rule is a bad idea, and give anecdotal stories about how delays in closings will affect your business. And please share this post with fellow lenders, mortgage bankers, closing attorneys and Realtors.


Richard D. Vetstein, Esq. is a Massachusetts real estate attorney with offices in Framingham and Needham, MA. You can reach him at info@vetsteinlawgroup.com.

  • John

    Is the rule really such a bad thing for the buyer and seller? In my recent closing I didn’t receive my final settlement numbers until less than 24 hours before closing — and the numbers were wrong, and the closing attorney ignored my requests to fix them prior to closing.

    It’s pretty ridiculous that “In today’s lending environment, last minute changes to settlement numbers are common” — maybe the lending environment should be fixed? Maybe requiring the lender and closing agent to get their ducks in a row, and not wait until the very last minute to finish the paperwork, and not screw things up (leaving us powerless) isn’t such a bad thing for the people actually buying and selling the houses?

    Perhaps the “crush of underwriting tasks” could be avoided if the underwriter didn’t wait until literally the last day to process the underwriting paperwork?

    I understand your concern — but as a buyer I felt it was inexcusable that all the paperwork sat on a pile for weeks and was acted upon at the last minute. Maybe a 72-hour window isn’t the solution to the problem — but it seems better than what we have now if it causes people to actually finish the paperwork reasonably early. What would you propose instead of the 72-hour delay?

    • John, you raise a good point. In your case, there’s no reason the closing attorney, working with your loan officer, should have ignored your concerns. We do that all the time, even at the closing table if numbers aren’t right.

      But I’m really not talking about lender fees — those should already be set well in advance of the closing and are already not supposed to increase over 10% from the Good Faith Estimate.

      I’m worried about non-lender fees like taxes, insurance, condo fees, etc. which we have limited control over receiving. I don’t want buyers having their closing pushed back over that stuff.

      I would eliminate the 72 hour rule in favor of a 24 hour rule, with the proviso that it only applies to lender generated closing fees. I would also build in a provision where the borrower can waive the waiting period so the closing can proceed as scheduled.

      Richard D. Vetstein, Esq.

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