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Know Before You Owe: What You Need to Know About the New Real Estate Closing Regulations

real estate closing regulations

 

The process of buying a home used to be governed by two separate federal regulations. The Truth in Lending Act (TILA) dealt with disclosures about the cost of borrowing. The Real Estate Settlement and Procedures Act (RESPA) determined the legal procedures and disclosure timelines associated with the actual process of getting from signing a contract between a buyer and seller and the closing meeting. In November 2013, however, the Consumer Financial Protection Bureau (CFPB) announced regulatory changes that would merge both of these prior legislations into one rule known as the TILA-RESPA Integrated Disclosure (TRID). Also known as the “Know Before You Owe” regulation, TRID went into effect on October 3, 2015. The CFPB wanted the new regulation to increase the availability of consumer information and streamline some of the real estate closing procedures.

 

The Closing Disclosure Form

One of the major benefits of the “Know Before You Owe” rule is that more borrowers are actually reviewing their closing documents before they get to the actual closing. Prior to the change, the HUD-1 closing forms were supposed to be done and available for borrowers to review at least 24 hours before the real estate closing. According to the rule, however, a borrower had to request to view the form. Otherwise, lenders assumed that the borrower waived the right to view the closing forms ahead of time. Many times borrowers did not know to request the closing forms, and lenders did not complete the forms until the day of closing.

 

According to the Know Before You Owe rule, however, lenders must provide the new Closing Disclosure form to borrowers at least three business days prior to the closing. Recent studies show that in the six months since the implementation of TRID, more buyers are taking the time to look over their closing forms prior to arriving at the closing meeting. Prior to the implementation of TRID, only about 74% of home buyers reviewed their closing documents at all. Now, around 92% of borrowers report that they are reviewing their closing documents prior to the real estate closing. This is a huge benefit to buyers who have the opportunity to closely review the breakdown of each closing expense before walking into the stressful closing meeting.

 

Delays and Disclosures

Lenders rather than title agents now prepare the closing documents and the Closing Disclosure form. The new form and process have caused some problems as everyone involved in the closing adjusts to the many procedural changes. Unaccustomed to the job of completing the Closing Disclosure form, lenders made mistakes completing the form that delayed closing. When the lender makes an update or correction to the Closing Disclosure form within three business days of closing, the whole timeline for closing must be reset. TRID requires that the borrower receive the entire three business days before closing to review the finalized closing documents. In addition, real estate agents report that new consent requirements hinder their ability to access and review the closing documents for their clients. Although the average time to close on a home purchase increased to around 50 days immediately after “Know Before You Owe” was implemented last year, delays created by the regulation are improving.

 

Five Clever Ways to Save on Back-to-School

clever ways to save on back to school

 

It was weird to see so many first day of school pictures online this morning, but kids around here go back to school this week. Every time I think about this time of the year, I feel a little sick. Not only does it mean my summer break is over, but it also reminds me of the stress and expense of that enormous shopping list. Even though our school supply list is now minimal, I thought I would share some clever ideas for school savings that I’ve discovered along the way.

 

  1. If your child wears basic uniform attire that you don’t need to purchase from a specific store, try to hold off from buying too much right now. A lot of stores are going to have uniform items on sale a couple of weeks after school starts, and you’ll be able to stock up for the rest of the year. Pick up a size larger too if your child is growing like a weed. You’ll be glad you did when you need it and have to pay full price later in the year.
  2. Make a list and check prices and availability across a variety of stores. Get your friends involved and share information with them. If you grab the class supply list and three friends, you can each price check one store and compare. Now you are all getting the best deals.
  3. Don’t forget about quality. You are not really saving money if you buy the 5 cent folders that rip to shreds after the first week of school. The same is true for polo shirts that pill or get holes. Don’t go overboard though. My son used to manage to get holes in the knees of pants even though I got him the good Lands End pants with iron knees. Eventually, I just made him wear shorts. Also, I decided not to spend $35 on those pants when he tore them up at the same rate as a less expensive pair.
  4. Look for coupon savings available through apps like Ibotta or Target Cartwheel in addition to the store’s advertised sales.
  5. Reduce, Reuse, Recycle. If last year’s clothes, shoes, or gear still fits, God bless you. Make use of those things at the start of school and look into getting something new when back-to-school goes on sale. A new backpack also makes a good birthday or Christmas gift.

 

Bonus Savings Tip: Stay at home. I used to dread back-to-school time. New backpacks, uniforms, sneakers, lunch boxes, loads of expensive school supplies, deposits on back-to-school activities, soccer shoes, tap shoes, ballet shoes, jazz shoes, soccer uniforms, and leotards. Back-to-school could easily run over $1000 for two kids. Plus, the stress of needing to find that exact pencil case or risk being chastised by the teacher. None of that. We are starting our homeschool year next week, and back-to-school has cost me less than $50. I buy things through the year when they are on sale, find a lot of free material online, and choose products that we can use for a long time. I’ve learned to be a lot more efficient over time. I’m not really suggesting that you homeschool just to save money, but it is just one of the many benefits.

free college tuition education

Why This Professor Does Not Support Free Higher Education

free college tuition education

 

I had planned to post something about back to school savings, but you are going to have to wait until next week for that post. Last night and this morning I got engaged in conversations about the Democratic National Party’s plan to offer free tuition for community college and state universities. Bernie Sanders brought this up during his campaign and said that Wall Street will pay for free college. I guess in some ways it comes across like Trump’s plan to build a wall and have Mexico pay for it. I don’t want to get political here because that’s not the point of my blog. I want to share finance, education, and career tips with you. As a professor at a state university, however, I feel like I need to say something about why I think this plan is a terrible idea.

 

  • The problem with the cost of higher education is the high cost of administration. People assume professors are cashing in on the big bucks and getting all kinds of benefits. Not true. Universities have bloated administrations with an office and staff for everything under the sun while the actual educators get nothing. They don’t get raises and they watch as travel and research funding fades away more each year due to budget cuts. My university creates new administrative offices and hires a whole staff to manage them. Meanwhile, we have three administrative assistants trying to manage all the needs of the entire College of Business. It’s crazy. I can only imagine the administration that would go into this free higher ed plan. Should this ever pass, I am out.
  • You have a choice about where you want to go to college. Weigh the costs with the expected income in your chosen field. Don’t go to a college that costs $60,000 a year and major in art or communication. Someone should point out that is stupid. If you still do it, you forfeit the right to complain. Four times I had to choose the college I could afford, and my parents pushed me towards choosing a major that would help me to secure a good job.
  • Being in debt from student loans is nothing new. I accumulated around $100,000 in student loans on the way to my Ph.D. Medical school students rack up that much debt too. So, it makes me mad when people are crying about their student loans. You signed the note yourself. The problem is the poor cost/benefit analysis (mentioned above) PLUS the abysmal job market caused by the increased cost of hiring and a puny economy. That story does not play well with younger voters. It’s easier to say, “Boo hoo, let’s make those evil bankers pay for my college.” Who do you think paid for their college education? They are probably paying off student loans too.
  • This plan will discourage choice and encourage class segregation in the same way lower income families are forced to send elementary school and high school students to public school while higher income families can afford better private school options. This goes against one of the major political issues in America today – class warfare and the disintegration of the middle class.
  • It is a truth of economic theory that something only has worth when you must give something of value to attain it. If your parents gave you a car when you first got your license and paid for all of the associated expenses, you did not care for the car the same way another teen did who worked to pay for the car. The same thing is true for education. College students who are not paying for college tend to lack a sense of ownership about their education. Students who have skin in the game and are helping to pay their way through college have a much better understanding of the value of that education. They work harder and get more out of the experience because it means more to them. I don’t want to be a part of a university filled with students attending for free.

 

Did you have to pay for college? Did your parents push you to a certain school or degree?