October 28, 2016

Agents Face Closing Doc Hurdles

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Agents Face Closing Doc Hurdles

Real estate professionals are reporting that several lenders and title companies are refusing to provide copies of final closing documents to them for the home buyers they represent, out of fears of breaking federal privacy laws.

But agents say that’s making it tough for them to scrutinize closing statements for their clients to help look for inaccuracies that could cost their buyers money or delay the settlement unnecessarily, The Washington Post reports.

Fifty-four percent of real estate professionals reported having difficulties getting the Closing Disclosure form used under the new federal rules, according to a survey from the National Association of REALTORS®. Also, half of those agents say they did find errors when they were able to finally review the documents. The errors ranged from incorrect fee charges, commission splits, taxes, as well as the omission of seller concessions listed to the buyers. 

In some instances, if errors are found, the transaction has to be put on hold for a mandatory three-day waiting period for the purchasers – a delay to closing.

Read more: Closing Delays Continue Under New Rules

“We’ve had some situations where this caused the termination of the entire transaction because the delay was found to be unacceptable to the sellers," says Eric Post, principal broker at BHGRE Realty Partners in Portland, Ore.

Real estate professionals used to regularly receive a copy of the HUD-1 closing form prior to closing. Usually it was delivered by the settlement or title agent or the attorney involved in the transaction. However, lenders are now responsible for delivering the Closing Disclosure – which has replaced the HUD-1, as of fall 2015 – to the home buyers. Lenders are hesitant to provide the document to the buyer’s agent since it is not clearly stated in the government’s rules as well as concerns over consumer privacy regulations.

That is frustrating many real estate professionalism and underscores the importance of agents and consumers reviewing the closing documents together.

“Errors are happening all the time,” Emily Vaile, regional manager for BHGRE David Winans & Associates in Dallas, told The Washington Post. “Maybe half” of Closing Disclosures contain errors, even if some are minor and clerical. They can still have big implications, Vaile says. “It may be obvious to the agent” too, she adds, but the buyers miss it.

Real estate agents say they are turning to the title or settlement agent when they don’t receive the Closing Disclosure from the lender. But some title agents are reluctant to provide them a copy as well due to federal privacy concerns. Some title agents are using customizable “settlement statements” from the American Land Title Association as a work-around—the statements itemize all the fees and charges that the buyer and sellers will pay during closing. It omits personal information to avoid any privacy rule concerns.

Source: “Realty Agents Say Lenders Are Refusing to Give Them Closing Documents in Advance,” The Washington Post (March 2, 2016)