This is How Lenders are Preparing for the New Mortgage Rules

Two people at desk with lender

Photo credit: Single Rent Inmobiliaria


Industry fears technology delays

Mortgage lenders and real estate agents are preparing for the October 3 implementation of a law that will change the way home sales are processed.  Although these changes are prompted by the five-year old Dodd-Frank financial law, they are intended to help consumers get more clarity on the terms of their mortgage. Some in the real estate industry are concerned that the rest of the year may be marked by delayed closings, confused real estate professionals and frustrated borrowers.

The changes are meant to prevent borrowers from agreeing to loan terms that they don’t understand, such as teasers or balloon payments due after a certain amount of time. The Consumer Financial Protection Bureau (CFPB) say that borrowers would benefit from a reduction in the number of federally-required documents and simplified language, ensuring that they have an opportunity to understand what they’re getting into before they sign a contract.

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To prepare for the changeover, lenders have spent billions on technology-system upgrades and training, according to David Stevens, President of the Mortgage Bankers Association.

“It is without question the single largest implementation challenge that the broad industry has faced since Dodd-Frank,” said Mr. Stevens. “It’s massive. It involves every real-estate agent, settlement-service provider, every consumer, mortgage originator, everyone.”

Bill Emerson, Chief Executive of Quicken Loans Inc. said about 350 employees have been working for 17 months on changing systems to meet the requirements of the new federally-mandated forms and processes.

“Clearly if we weren’t doing that, we’d have folks deployed on other projects, maybe things that would be innovative. But there’s no choice. You have to do it,” said Mr. Emerson, who confirmed that Quicken is prepared.

Although the real estate industry has had a long time to prepare for the new rules, some in the industry are concerned that technology issues may crop up in the days after the rollout. The National Association of REALTORS (NAR) is advising real estate agents to plan on extending contracts an additional 15 days in anticipation of delays.

The NAR has held many webinars, conference calls and training sessions with agents to help prepare them for the changes. NAR President, Chris Polychron was asked about the potential for delays, he said, “Are there going to be some blips? Yeah. Are there going to be some delays? Absolutely.”

The CFPB began designing the new rules and forms back in February 2011, a few months after the Dodd-Frank reform passed and the final rules were issued almost two years ago. The original implementation date was August 1, but some lenders and others in the real estate industry didn’t think they would be prepared by this deadline. Also these groups were concerned that the changes may disrupt transactions during the summer selling season.  After a bipartisan group of congressmen urged the CFPB to reconsider, the date was pushed out.

The CFPB will also use discretion in not giving out penalties against lenders as long as it believes the lender is making a legitimate effort to comply with the new rules.



The Wall Street Journal. New Mortgage Rules May Spark Delays, Frustration




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