Monday, June 15, 2015

How TILA-RESPA Integrated Disclosure Rule (the "Rule") Will Impact Real Estate Closings in New Jersey

Did you know significant new lending regulations are coming? Ready or not, the new TILA-RESPA Integrated Disclosure Rule (the "Rule") will become effective on August 1, 2015!  

Among other changes, the Rule will replace the Truth-in-Lending Disclosure Statement and the HUD-1 Settlement Statement with a new "Closing Disclosure." Unlike the HUD-1 Settlement Statement that has been typically prepared by attorneys representing the lender, most, if not all lenders, will require the Closing Disclosure to be prepared by the lender. 

The lender will determine what closing costs and figures must be included in the Closing Disclosure. Significantly, the Closing Disclosure must be delivered to the borrower not later than three business days prior to closing. If any closing figures change after delivery of the Closing Disclosure and prior to closing, the lender must determine whether a revised Closing Disclosure must be delivered to the borrower, thereby postponing the closing for at least three business days after such delivery.  

Clearly, the Rule was not designed with standard New Jersey practice in mind. Preparing to close a New Jersey residential real estate transaction requires receipt of closing figures from various parties (co-op/condo managing agents, purchasers' lenders, sellers' lenders, title companies, etc.).  Often, such figures are not available until the day prior to closing, and sometimes, even the day of closing.

New Jersey real estate professionals will have to find a way to comply with the Rule. Now more than ever before, it is important that purchasers and sellers of residential real estate retain qualified real estate attorneys who are familiar with the Rule and have the capacity to comply with it.  

For more information about the Rule or any other questions concerning the legal aspects of handling real estate transactions, please feel free to contact us.

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