Education, collaboration, key to industry readiness
With the implementation of the Consumer Financial Protection Bureau’s “Know Before You Owe” rule less than two weeks away, many real estate professionals are bracing for how the rule will change the home-buying process starting Oct. 3. To prepare for these changes, some Chicago providers have been taking creative steps that can serve as a model for the rest of the industry.
“Although we’ve known since 2013 that these changes were coming, some industry professionals still have not fully updated their systems,” said Ben Niernberg, executive vice-president of business development and operations at Northbrook, Illinois-based Proper Title, LLC, a full-service title insurance agency. “Integrating the new required fee quotes, generating the new closing disclosure forms, and implementing tracking systems to gauge the new delivery and review periods, is no small undertaking,” he said. “But in addition to spending the past year and a half making sure Proper Title was prepared, we’ve also taken a proactive approach to ensure our clients – and our partners – are prepared to navigate the new process.”
Over the past year, Proper Title has been hosting free educational seminars available to brokers, attorneys, developers and lenders, outlining the requirements of the rule changes. The sessions are also eligible for continuing education credits.
The firm also recently launched “Proper Agent,” an app available on iTunes that makes it easy to instantly estimate not just mortgage and tax calculations, but also closing costs. “The ‘Know Before You Owe’ rule will emphasize the importance of understanding all of the fees associated with a home purchase or sale,” said Niernberg. “That makes it even more important for agents to present themselves as experts in this space, and why we’ve created this app just for them.”
According to Scott Parker, vic- president at john greene Realtor, one of the largest independent brokerages in Chicago’s western suburbs, choosing the right partners will be critical for buyers and agents in navigating the new closing process. “Closing dates are the single most important thing to home buyers and sellers,” he said. “And because brokers serve as the quarterback on every transaction, we need to have a network of partners we can trust to hit deadlines and avoid needless delays.”
Under the new rule, there will be a three-day period to confirm the buyer has received the five-page Closing Disclosure form from the lender, and an additional three days for the buyer to review it. Any allowable revisions, such as changing from a fixed-rate to an adjustable-rate loan, or a significant increase in the APR since the original form was generated, will require an additional three-day review period for the buyer to review the modified Closing Disclosure.
Understanding the potential impact significant delays will have on buyers and sellers alike, john greene Realtor has also been busy lining up the right partners beyond the closing table, according to a news release. The firm has identified third-party vendors capable of providing extended stay, storage and pod services for clients who may experience delays between closings on their former and future homes. “Some delays will be unavoidable, so having a safety net in place is truly the only way to ensure a smooth transition.”
Meanwhile, Related Realty plans to provide ongoing education for its staff as the new rule is rolled out. “Buying a home is one of the most significant purchases a person will make in their lifetime,” said Jeanine McShea, vice-president and managing broker at Related Realty. “As advocates for our clients, we need to continually stay well-versed in the process and be able to manage any additional changes that may come.”
Changes have already been made to the “Know Before You Owe” rule over the past few months, including clarification of what Closing Disclosure modifications will trigger a new three-day review period, as well as the delay in implementation from Aug. 1 to Oct. 3. “It’s possible there will be more changes as the new rule moves forward, and we discover what works and what doesn’t work,” said McShea. “That’s why we’re focused on becoming – and remaining – experts on this matter.”
McShea added that implementation of the new rule requires ongoing collaboration among lending, brokerage, title, and legal providers. “‘Know Before You Owe’ was created to help consumers more fully understand the terms of their transaction,” she said. “And if we in the industry can come together and make this truly a team effort, the consumer wins.”