Mortgage Changes October 3, 2015

Beginning today, applicants for most home mortgages will receive new forms from their lender that are intended to make it easier to review and compare loan offers.

Along with the updated forms, new rules aimed at simplifying the borrowing process for consumers will also take effect.

Mortgage applications submitted through Friday are governed by the old rules, while applications submitted on or after Saturday will fall under the new rules.

At least initially, consumers may encounter lengthier waits to close on the purchase of their home. While 30-day waits are now common in some markets, borrowers may have to wait 45 or even 60 days as lenders familiarize themselves with the new rules, according to Bob Davis, executive vice president of the American Bankers Association.

“I’m sure there are going to be growing pains,” Mr. Davis said.

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The switch to the new forms has been in the works for more than a year and was originally scheduled to take effect on Aug. 1, but the changes were delayed until Oct. 3. The two-month breather has given mortgage software vendors additional time to make necessary changes, but there still may be problems.

“This is a new process for everybody,” said Diane Evans, president of the American Land Title Association, an industry group for title insurers and settlement agents. “No one’s had practice at it.”

The new forms are supposed to make it easier for borrowers to compare loan offers and to see if the final loan terms differ significantly from the initial estimate. The change was required by the Dodd-Frank financial reform law, which directed the Consumer Financial Protection Bureau to combine and simplify older disclosure documents required by two different federal laws.

Under the new rules, borrowers will receive a loan estimate, including information like the interest rate and monthly payment, within three business days of applying for a loan. If they apply to several lenders, the offers will be displayed in a similar format so the borrowers can compare terms like fees and interest rates.

Holden Lewis, a mortgage analyst at Bankrate.com, said borrowers can easily see how much each loan will cost over the first five years by comparing forms. The form was tested with consumer focus groups and went through several revisions to make it as easily comprehensible as possible. “This is very much a net positive for consumers,” he said.

Lenders must also give borrowers a disclosure, which details the final loan terms and summarizes the transaction, three business days before the closing. Borrowers can compare the disclosure with their initial loan estimate to see any changes.

The bureau says that only major changes in a loan — like a switch to an adjustable-rate loan from a fixed-rate loan, a significantly higher interest rate or the addition of prepayment penalties — should require a revised disclosure, which brings another three-day waiting period.

“Some have been spreading misinformation about this point, claiming that last-minute changes based on walk-throughs or similar circumstances will cause frequent three-day delays in the closing process,” Richard Cordray, the bureau’s director, said last month in prepared remarks to the National Association of Realtors. “That is simply wrong.”

But it most likely will not be clear until late October or early November, when closings under the new rules start occurring, if the new approach is causing serious confusion.

Here are some questions and answers about the new mortgage rules:

■ How can I minimize possible delays?

You can get up to speed on the new forms and rules by reading about them on the bureau’s website.

Ms. Evans said borrowers should ask questions, listen carefully to instructions from their lender and be prepared to supply extra information promptly if asked. The quicker borrowers provide what is needed, she said, the faster the process can move.

■ What if I have already submitted a mortgage application?

If you applied before Oct. 3 and your loan is in process, the new rules and forms do not apply, Ms. Evans said.

■ Will the rules affect the availability of any loans?

While standard loan options should be “readily” available, some lenders may temporarily curtail certain specialty loans, Mr. Davis said. For instance, he said, some lenders may limit “construction to permanent” loans, which allow borrowers to finance a construction loan and a long-term mortgage with a single closing, because of confusion over how to disclose the information.