On August 1st The Dodd-Frank Wall Street Reform and Consumer Protection Act Loan Estimate and Closing Disclosure will take effect. While the new rules will primarily effect mortgage lenders and title agencies, builders won’t be left unscathed.
The rules aim to provide a clearer closing process for the home buyer by combining the Good Faith Estimate and initial Truth-In-Lending disclosures into one document–a “Loan Estimate” form. That document must be provided to the customer no more than three days after the application. If there are changes to things like annual percentage rate, loan product adjustments, or prepayment penalties added, closing could be delayed.
How it will impact builders:
– The Dodd-Frank changes put pressure on builders to make their lenders aware of any changes to the contract or any change orders at least a week before closing.
– If a closing is delayed, there will be repercussions for the builder. Because the builder has to carry a fully built home on its books for extra days, there could be carrying costs associated with that time.
– Customer service issues might be a bigger concern. Consumers scheduling things like moving trucks, appliance deliveries, and cable service may have to move things around causing an inconvenience.
The main thing builders can do is stay in touch with their lending partners, realtors, customers, and settlement agents. NAHB will be offering a webinar on June 24th to help builders get up to speed.