The federal government has a real estate question for consumers who’ve bought or refinanced homes that’s certain to generate more than an earful: Were there any problems when you went to close the deal?
Any last-minute glitches or surprises that delayed the settlement, required unexpected negotiations or, worst of all, blew up the sale or refi? Did you get your settlement sheet in advance so that you could review the documents intelligently? Were there any errors or discrepancies that popped up – charges that were considerably higher than you had expected, loan-related fees or an interest rate that differed from what you thought you had signed up for? Was the whole process pleasant? Was it “empowering”?
Wow. Talk about stirring up hornets. The Consumer Financial Protection Bureau, which has broad regulatory powers in the real estate settlement arena, wants to know whether there are common problems that need to be fixed. If so, it may make what it euphemistically calls “interventions” in order to right what seems to be wrong.
The bureau also wants to hear from realty professionals, lenders, title insurance and escrow agents, attorneys and others who play roles in closings on homes – the people who produce, bless and witness the signings of mounds and pounds of paper associated with the settling of America’s home transactions.
From industry accounts, the vast majority of closings are successful. The National Association of Realtors estimates that roughly 10 percent to 12 percent of all pending sales don’t close for various reasons. But conversations with agents suggest that a much higher percentage of settlements experience problems that arise just before or during the event that either delay or complicate the process.
Though 11th-hour delays can occur because of title insurance-related issues and various others, a disproportionate percentage appear to be related to the mortgage. Late in the game, the lender might inform the borrower: Sorry, but we’ve encountered some underwriting red flags in your application that you’ll need to resolve before we can proceed. Or oops, we didn’t get all the loan documents to the closing agent in time. Or worst of all, we’ve changed our mind. We simply cannot do this loan and we sincerely regret that we’re telling you this on the day before your scheduled closing.