How the Update to ‘Know Before You Owe’ Rule Will Benefit Homebuyers

Last October, the Consumer Financial Protection Bureau’s ‘Know Before You Owe’ initiative went into effect with the goal of promoting greater transparency throughout the home buying process.

The rule introduced the new Loan Estimate and Closing Disclosure forms which are meant to be easier for consumers to read and understand. Both documents provide consumers with a clear outline of what a mortgage will cost, including the interest rate, loan term, estimated payments, and more. Having access to these forms ahead of time helps avoid any last-minute surprises during closing.

‘Know Before You Owe’ Challenges for Lenders and Agents

An improvement to disclosure documents and transparency of financial information during home buying is a win-win for lenders and consumers. However, from an operations standpoint, there have been a few bumps in the road during the ‘Know Before You Owe’ rollout and implementation.

One of the problem areas was very murky guidance on whether lenders should make the Closing Disclosure form (commonly called the CD) available to real estate agents due to privacy concerns. This lack of clarity in the rule has caused some real estate professionals acting on behalf of their client to have difficulty getting the forms early enough in the process.

In a letter to the CFPB, the National Association of REALTORS President states:

“Since the rule was implemented, 54.5 percent of real estate professionals who were surveyed now have problems getting access to the Closing Disclosure. Real estate professionals are even more likely to have issues getting access to the Closing Disclosure when settlement is delayed.”

Amendment to Improve Access to Disclosures for Third-Parties

In an announcement on Friday, July 29th, the CFPB addressed feedback it’s received from the industry regarding difficulties in implementation of the initiative and the new disclosure forms.

The CFPB proposed new amendments to the rule acknowledging that it’s appropriate for third-parties such as real estate brokers and other agents to get access to the disclosures. The CFPB plans to expand on these guidelines for sharing information to allow for a less challenging exchange of information.

The big question is: How will this benefit you, the consumer?

Since your home is likely the largest purchase you’ll make in your lifetime, understanding every aspect of the financials relating to your home purchase is crucial. With access to your disclosures, a real estate agent can review the forms with you, check for accuracy, and offer you advice.

Knowing what we can and can’t share with your agent can also reduce paperwork obstacles leading up to closing. This new development is a step in the right direction for clarifying access to disclosures and the role of an agent acting on your behalf.


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