As of last week, while it might not take longer for a bank to approve your financing application there may be some delays due to new rules laid out by the Consumer Financial Protection Bureau. One of the biggest complaints consumers andLonger Escrow Periods, Higher Rates? real estate agents have when it comes to the settlement is not being able to review closing documents and settlement fees prior to closing.

While many lenders have always made it a practice to provide the buyers with advance notice of the settlement statement and how much money will be needed at closing, it wasn’t uncommon for buyers, sellers and agents alike to view the settlement papers for the very first time at the closing table.

Loan officers, the good ones, were always at the closing table to explain the various fees again and to walk the borrowers through the maze of paperwork. With the new CFPB guidelines, lenders must provide the borrowers with a final settlement statement that lists all fees and credits that will apply three days prior to the closing. This three day “quiet time” is enough time for borrowers to review the settlement costs and avoid any last minute surprises that might scuttle a closing. Yet if there is a discrepancy or the borrowers disagree with the fees and the lender has to make corrections, the three day window starts all over again.

 

This will likely mean sales contracts will no longer have a 30 day escrow period but perhaps something closer to 45 days. That can also mean higher rates to borrowers because interest rate lock-in periods might have to be extended. Longer lock times mean higher charges to lock the rate for a longer period of time. It’s really too early to tell if this trend will in fact come to fruition but we’ll soon find out as those October sales contracts start floating in.