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New rules on closing dates may open can of worms

My column is not about the Andrea Gail and the ill-fated swordfishermen from Gloucester, but I am wondering if we are headed toward disaster.

The target of my concern? New regulations hitting the mortgage market Aug. 1.

For the past few years, the mortgage market has been under the gaze of a new watchdog — the Consumer Financial Protection Bureau , or CFPB. As a part of its charge, the agency must protect consumers from unfair lending practices. Not too long ago, the agency issued its “Final Rule.” It is 2,000-plus pages and provides a historical prospective of the 2007-08 housing bubble and sets forth new regulations and changes in forms. (Yes, I read it. It was a sleeper).

My concern is the three-day closing disclosure (say that three times fast.). In our industry, especially on purchase documents, final figures are usually presented the day of the closing, if not the day before. Everything is always last minute, and it has been this way for as long as I can remember. Updated figures and adjustments are just a part of the real estate transaction, but starting Aug. 1, lenders must present the final figures to the borrower three days prior to closing. We won’t be allowed to adjust the figures after that.

What’s the problem? Well, suppose I was selling a house and I was giving the buyer a $5,000 closing credit. The buyer is using Put A Name Here Mortgage Co. for the financing of this transaction. We have a scheduled closing date of March 1, 2016, pursuant to the contract for sale. Under the new disclosure rule, the lender or the attorney representing the mortgage lender must provide the final figures to the borrower three business days prior to closing and make no changes after that. But what if the lender or the buyer’s attorney missed the closing credit and it was not reflected in the final numbers? Now everyone is in an uproar.

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By my reading of the rule, the closing date would need to be pushed back so the correct numbers can be re-disclosed for another three-day period. Let’s add to the layers of confusion. What if I were buying a house and needed the proceeds from the closing to purchase my new home? And the closing was scheduled on the same day I was selling my house.

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I trust you can see the problem.

The last issue comes down to enforcement. It is my understanding that the mortgage lender must prove to the CFBP that the three-day disclosure obligation was met. What happens if a situation like the one I just described occurs? Will the regulators make an exception if there is escrow money at risk? Only time will tell.

Hugh Fitzpatrick is the founding partner of New England Title and Fitzpatrick & Associates PC, a Tewksbury-based law firm specializing in real estate conveyancing. Send your questions to Address@globe.com.