The Real Deal New York

Government aims to reform mortgage disclosure rule’s “black hole”

New change addresses when companies need to tell consumers about closing cost increases
May 02, 2018 11:00AM

Park Slope townhouses (Credit: Corcoran)

The Consumer Finance Protection Bureau has finalized changes to a mortgage disclosure rule in an attempt to limit ambiguity about when lenders need to tell prospective borrowers about closing costs.

The changes to the “Know Before You Owe” rule from 2015 aim to clarify when lenders can pass higher closing costs onto consumers and make those costs more transparent on the disclosure form for closings, according to Inman.

The rule was first established to give consumers estimates of terms and closing costs for loans, but confusion arose over when creditors were allowed to pass increased costs onto consumers, as the original rule did not specify a timeframe.

The change establishes a four-day timeframe, getting rid of what the industry had dubbed the “black hole.” These changes were first proposed in July, and the National Association of Realtors had backed them. [Inman]Eddie Small