All You Need to Know About Know-Before-You-Owe

Know-Before-You-Owe

The mortgage industry goes through a revamp in the way it operates, every time new rules and regulations are put into effect. As a result, the lending organizations always have to keep themselves updated with the latest happenings since clients consider them to be trusted sources of information.

However, to give more autonomy to the borrowers, the Consumer Financial Protection Bureau in 2013 published the Know-Before-You-Owe program. This component was built into the mortgage program for strengthening customer education. Also it enhance the process of loan-shopping, and making the loan documents easier to understand. Besides helping clients to make better mortgage choices, the program involves the execution of the TILA-RESPA Integrated Disclosure rule, often called the “TRID.

The Know-Before-You-Owe program, on a primary level, includes the following things –

Smooth and On-time Closings

The Know-Before-You-Owe program lets potential borrowers enjoy a positive experience throughout the mortgage origination process. Closings are made smoothly and on-time.

The Process Streamlined by New Disclosures

The new mortgage technology program has brought down the paperwork from four to two documents. Borrowers can now compare and make a note of the changes since the application and closing pages mirror each other.

Discover Things related to the Mortgage Process that Have Changed and Haven’t

All things related to the mortgage process that has and hasn’t changed are put together to let lending institutions and borrowers understand what impact the changes may have on them.

Improbability of getting Additional Three-Day Reviews

The Know-Before-You-Owe rule allows lending institutions to give the borrowers fresh, easier-to-use disclosures concerning their mortgage, three business days before closing. This lets borrowers get sufficient time to evaluate the terms of the deal before the closing.

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Sharing CFPB Resources with Borrowers

The Know-Before-You-Owe program aims to create repeat customers who will suggest the name of the lending institution to their family and friends. Thus, it has drafted resources that can be used in educating and marketing to the clients. It give the chance for preparing them to be informed and knowledgeable.

When the TRID rules were out, two-thirds of the companies had said that they were ready for the Know-Before-You-Owe mortgage program. The rest one-third stated that they did not have enough time to check and combine systems and coach their workers. Thus the Homebuyer’s Assistance Act was brought into effect. The act provides a grace period to the lenders to help them conform to the TRID rules implemented in 2015. Until February 1, 2016, these rules also guarded investors against civil liabilities, since no suit could be filed against anyone for going against the requirements.

Know-Before-You-Owe program, in essence, simplifies and demystifies the mortgage cycle. In place of four disclosure forms that comprised the mortgage origination phase, currently, there are only two forms. Those are—the Loan Estimate and the Closing Disclosure. These are much easier to understand and use. Moreover, the customers get three business days to review the Closing Disclosure before signing up for a mortgage. In this evaluation period, they can ask any clarifications and make sure that they are signing up for the best deal in a market that suits their needs.

Most of the today’s mortgage origination software integrates features to ensure smooth compliance to the CFPB norms. They help the customers understand the loan options available to them. They do necessary estimations, compare their loan estimate with closing disclosure and understand if there are any differences. This increases transparency in the entire process and empowers customers to make informed decisions as to the most beneficial deal. That way the Know-Before-You-Owe program has facilitated healthy competition between lending institutions thus improving healthy options for the customers.

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