By John C. Morreale, Owner
Global American Title Agency, Inc.
Everything you know about the purchase or sale of residential real estate is changing August 1st of this year. There is a new sheriff in town and his name is Consumer Financial Protection Bureau (CFPB). When the CFPB was created on July 21, 2010 in the aftermath of the real estate collapse many of the regulatory responsibilities that were previously under the Housing & Urban Development (HUD) department were assumed by the newly created CFPB. Naturally, the first thing they did was rewrite all the rules.
There are a zillion different aspects of the massive rewrite of the lending regulations that someone could devote their whole life to understanding and there are many of those who have done just that. But, I am going to focus on the direct effects that the new regulations will have on the relocation industry. In comparison to other industries, the relocation industry is in a great position to adapt to the new way of doing business.
Two issues will directly affect the relocation industry. One is the HUD document that we are all used to seeing being produced at a closing will be replaced with a Closing Statement. The standardization goals of the CFPB will no longer allow for discretion in the way certain items appear on the newly developed Closing Statement. The best example is closing costs. The last set of regulations from 2010 favored itemizing the costs, and the new regulations try to combine everything so the consumer does not need to bring a calculator to the closing. This will make it more difficult for the Relocation Company to prepare an accurate invoice for the corporate client. The solution is for us closing service providers to include one more piece of paper in the “after close package” that is provided to our clients. Our new form will break out the costs reflected on the Closing Statement in a format to make accounting’s job much easier. No problem here.
The second issue that may affect the relocation industry is the new time frames that are being imposed on the lenders. The timeframes are similar to the traditional timeframes for a residential refinance transaction. The borrower (Buyer) has the right to have all the figures pertaining to their purchase 3 days prior to the closing (settlement). If any of the closing figures change then the buyer has another 3 days to reconsider their loan. This has the potential to delay closings and add costs to our corporate clients’ relocation policy. But, here again the relocation industry has already addressed this issue by implementing some “best practices”. The addendum that is attached to every relocation transaction notifies the buyer that this is a unique transaction and there will be no changes to the contract at the last minute. All flaws of the property are priced into the deal and the deal is “as is”. Relocation adopted this solution during the tough times of the past. Another best practice adopted by the relocation industry is to have the buyers do their final walk through at least 3 days before the closing. If the Buyer does their final walk through on the way to the closing then there will be no financial readdress of the issue(s). Again, no problem here.
To learn more about the numerous changes being implemented, pour yourself a large cup of coffee and check these very informative web sites: consumerfinance.gov, alta.org and realtor.com. If you still have questions, feel free to call me. But don’t worry, your supply partners have your back.