WASHINGTON — A new mortgage disclosure regime due to take effect on Aug. 1 is unlikely to cause closing delays, according to Consumer Financial Protection Bureau Director Richard Cordray.
Under the new disclosures mandated by CFPB, homebuyers must receive the new closing disclosure three days prior to the closing. Lenders fear if they must make changes to the document, it could effectively cause a delay in closing.
But Cordray insisted that wouldn't be the case.
"The three-day requirement should not interfere with a successful closing, as some have claimed," Cordray told a National Association of Realtors conference on Tuesday.
Cordray stressed that there are "serious misunderstandings" about what last-minute changes to the closing disclosure would prompt a delay.
"The timing of the closing date is not going to change based on any problems you discover with the home on the final walk-through, even matters that may change some of the sales terms or require seller's credits," Cordray said.
There are only three circumstances that would delay a closing: an increase to the annual percentage rate by more than one-eighth of a percent for fixed-rate loans or more than one-fourth of a percent for variable-rate loans; the addition of a prepayment penalty to the loan; or a change in the basic loan product, such as moving from a fixed-rate loan to a variable-rate loan.
"That is it," Cordray said. "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."
Industry groups have been urging CFPB to provide a "hold harmless" period from Aug. 1 through the end of the year so that lenders, title companies and other won't face enforcement actions if they make mistakes.
In speaking to the Realtors, Cordray noted the Truth in Lending Act — Real Estate Settlement Procedures Act joint disclosure was finalized in November 2013 and the CFPB provided the industry with a 21-month implement period.
Cordray did not refer to a "hold harmless" period in his prepared remarks, but he noted that "most market players have put themselves in position to be ready by August, and others are getting ready as well."
However, Cordray is keeping his ear to the ground.
"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," he said.
The director seemed to dismiss critics, however, that the implementation of the new disclosure could be disruptive to the real estate and mortgage markets.
"I feel very confident in predicting that the housing recovery will show up this year and will sustain the economic recovery into the future," Cordray said.