THE CONSUMER FINANCE PROTECTION BUREAU is a federal agency formed to create and enforce regulations pertaining to the financial services industry. According to its website, consumerfinance.gov, the CFPB is a “21st-century agency that helps consumer finance work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

I would venture a guess that if you took a poll of consumer finance professionals and asked if they believed that the CFPB has made them more effective, the response would be overwhelming negative. But the CFPB has been effective in the sense that they have enacted a large volume of new regulations — and issued huge fines and civil settlements.

Most of these settlements and fines have had great merit, such as the announcement last week of a $27.5 million judgment the agency obtained in cooperation with the Florida attorney general against a group of foreclosure relief fraudsters. Among the regulatory reform CFPB has enacted is an overhaul to the Truth in Lending Act and the Real Estate Settlement Procedures Act; the RESPA changes set to take effect Aug. 1 will eliminate some closing cost disclosures that have been in use for decades, replacing them with new disclosures and additional timing requirements.

As everyone in the real estate industry prepares for the changes, many fear “the sky is falling,” and some believe the days of closing a real estate transaction in 30 days or less may be over.

Lenders are currently required to deliver a “Good Faith Estimate” of closing costs and a “Truth in Lending” disclosure to borrowers within three days of the borrower submitting a complete application. These disclosures will be replaced by a new “Loan Estimate” that will basically contain the same information along with a few new terms. These new disclosures also will be required to be sent to borrowers within three days of a completed application.

No big deal, just some new forms and new terms for lenders to explain to borrowers.

The big change that has everyone so concerned is with the closing disclosures.

The HUD1, the current closing statement that details all the costs associated with buying or selling a piece of real property, is being eliminated. Lenders will now be required to deliver the new disclosure, the “Closing Disclosure,” at least three days — and as much as seven — prior to the loan closing. The loan closing is defined by the date the borrower signs their loan documents.

Presently, most borrowers receive their HUD1 at the time they sign loan documents. Typically it is not even prepared until the day before borrowers sign; it is prepared by the escrow company. Now, with the new disclosures, most lenders will prepare the disclosure and insure delivery to the borrower.

No doubt, as the industry adjusts there will be some growing pains — and no doubt some escrows will be delayed.

Frequently in real estate transactions there are last-minute negotiations between buyer and the seller. With the new disclosure requirements some of these negotiations will trigger a re-disclosure of the Loan Estimate or of the Closing Disclosure.

For example, let’s say it’s Thursday and you are planning to sign loan documents tomorrow, to close escrow on your new home tomorrow afternoon. A last-minute negotiation that alters the closing disclosure and triggers a new three-day period will mean you cannot sign and close until Tuesday.

It doesn’t sound like the end of the world — unless you have moving vans lined up or a domino of buyers and sellers exchanging properties.

Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.

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