CFPB Rule Changes – New regulations set forth by the Consumer Finance Protection Bureau are scheduled to take effect next year, which will likely impact the corporate relocation process going forward. The financial information that relocating employees have to provide to lenders is changing.
Employee relocation is a complex process, which is why an expert relocation management company proves to be beneficial in moving talent. A major aspect of an employee relocation is the sale or purchase of a home, and up until this point, the real estate aspect of a relocation has been relatively static.
The Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act of 1968 laid the groundwork for buying and selling residential real estate in that both pieces of legislation required substantial financial information from the buyer. This included a detailed advanced disclosure of estimated and actual mortgage lender, title and other settlement costs to borrowers, according to the U.S. Department of Housing and Urban Development’s website. In essence, the legislation made it easier to obtain mortgage financing.
Changes are wide-sweeping
In the past, a number of different parties all worked together to provide a seamless and comfortable moving experience for the moving employee. More specifically, the third-party relocation service, the employee’s company, insurance underwriters, attorneys and real estate agents all pitched in to create a comfortable moving experience for relocating employees. While it may seem unrelated that the CFPB – an agency that was created to help prevent another financial meltdown in 2010 after the economic recession was in full swing – has laid out new regulations set to take place in April 2015, corporate relocation will be impacted nonetheless. Since so many parties are involved in making the employee transition smooth, almost everyone is affected in some way.
In April 2012, the CFB Bulletin 2012-03 established new regulations that placed responsibility on the lender to protect consumers who obtained loans to purchase real estate property. The rules were put in place to protect the consumer. Yet, even though banks and lenders are now responsible for financial oversight and protection, the trickle-down affect corporate relocation efforts as well. Although most relocation companies interact with relocated employees prior to the purchase of a property, transferees may likely use a portion of an allocated allowance to apply for a mortgage, which is where the reach of the CFPB comes into play.
Relocation services impacted
More recently, the CFPB announced a rule that eliminated the good faith estimate, the HUD-1, or the former settlement sheet where all seller and buyer costs and proceeds are calculated and shown. The new closing disclosure form must be provided to the buyer three days before closing, or consummation, as the CFPB now calls it. After this window, only limited items can change, according to relocation services industry trade group Worldwide ERC.
Worldwide ERC pointed out that since most relocation service providers now require a HUD-1 at least two days before closing to obtain client approval, the process may be backed up to five days once the new regulations take effect. These added regulations point to the increased complexities surrounding employee relocation, and highlight the need for partnering with an expert in global talent management.