More homebuyers are reviewing their mortgage documents ahead of their scheduled closing under new federal regulations, according to results of a Home Closing Survey conducted by the American Land Title Association.
As of Oct. 3, 2016, under the Know Before You Owe regulation, the Consumer Financial Protection Bureau (CFPB) requires homebuyers to receive a five-page Closing Disclosure at least three days before the closing of their mortgage.
“While there remain challenges to complying with the regulation, title and settlement agents went to great lengths to prepare and train staff prior about the new process,” said Michelle Korsmo, ALTA’s chief executive officer. “The hard work of these professionals paid off as our survey found that 92 percent of surveyed homebuyers are taking time to review their mortgage documents before the closing. This compares to only 74 percent of consumers who reported having reviewed their documents prior to the new regulation.”
The survey was held in two phases. During the first stage, data was collected prior to implementation of the new mortgage disclosures to assess the closing experience of more than 800 homebuyers using the HUD-1 Settlement Statement. The second phase gathered information from nearly 700 homebuyers about their closing experience under the new rules requiring use of the Closing Disclosure.
Potential Closing Delays
Additionally, the new regulations have had minimal impact on whether closings occurred on time. Prior to implementation of Know Before You Owe, homebuyers reported that 77 percent of closings took place as scheduled. With the Closing Disclosure, 74 percent of closings are taking place as scheduled.
“Settlement agents reported that the top reasons for rescheduling a closing to another day were issues with lender underwriting, a delay from the lender and an issue with the three-day rule,” Korsmo said.
Collaboration Needed for Positive Consumer Experience
The survey also showed the continued need for all parties involved in the transaction to work together to ensure the consumer experiences a positive closing. According to the survey, consumers received valuable information about their transaction from loan officers (39 percent), title/settlement agents (30 percent) and real estate agents (29 percent).
“ALTA was determined to ensure the vital role of title and settlement agents would not be diminished because the new rules put more liability on lenders,” Korsmo said. “Fortunately, consumers continue to view title and settlement agents as valuable resources that provide peace of mind and help them get the keys to their home. We appreciate the members of the Mortgage Bankers Association and National Association of Realtors working with ALTA members to ensure the consumer experience remains positive. Continued collaboration among title agents, Realtors and lenders is paramount to educate consumers about their real estate transaction.”
The survey indicated that continued education about the benefits of owner’s title insurance is needed. According to the survey, 12 percent of homebuyers in a purchase transaction using the Closing Disclosure were unsure if they bought an owner’s policy. This compares to 8 percent of homebuyers who were unsure if they purchased an owner’s policy under the old regulations.
“Consumers should leave the closing table confident that they know they purchased an owner’s title insurance policy and protected their property rights,” Korsmo said. “Unfortunately, as the CFPB’s current approach does not provide consumers with clear information about their title insurance costs. The required calculation under TRID for title insurance fees is not transparent or accurate and is inconsistent with the Bureau’s mission to better inform consumers.”
The CFPB announced it would clarify and provide additional guidance on the rule this summer. ALTA will continue to work with the CFPB to correct the inaccurate calculation of title insurance policy premiums on the mortgage disclosures.
“In the meantime, we encourage ALTA members to use the education materials provided in our Homebuyer Outreach Program to help educate consumers about the benefits of owner’s title insurance,” Korsmo said. “Homebuyers should understand the important role title agents play in reducing their risks, providing peace of mind and protecting their property rights.”