What in the whole wide universe is a Change of Circumstance form? It sounds like the most bureaucratic and needless document ever. As part of recent RESPA law changes we now have to issue a mortgage borrower a Change of Circumstance form any time we make a change.Can I please get some applause for the use and reintroduction of logic into the mortgage business?
Examples of when a change of circumstance is needed
Here are some examples of when we have to send the mortgage client these Change of Circumstance forms. They can be anywhere from 6-10 pages each time there is a change.
- Loan amount changes
- Lock-in expiration date changes
- Name change
- Loan program change
- Interest rate change
I could go on, but you get the point.
A wild story
I had a client recently who was refinancing, and it took more time than we expected so we extended her lock-in for her. After that she decided to change the loan term. That changed the interest rate. Then right before settlement she decided to add her husband to the Deed. She had previously decided not to add him on the Deed because they were newly married. This resulted in almost 25 pages of these frequently cursed Change of Circumstance forms. This was due to three separate sets of changes!
The form is now used to make sure the consumer does not have a last minute change hidden from them. This way they won’t show up at the settlement of their loan to an expensive surprise.
What can the consumer do?
I understand protecting the consumer, but they were already protected. If there was an alteration to the loan terms at settlement that they were unaware of the consumer can:
- Not sign the documents
- File lawsuit
- Scream and yell
- Call the local news station to air their complaint
- Get online and complain to one of dozens of websites that allow people to air their opinions
- And more
The bottom line
Most of the bad actors in the mortgage industry that were perpetrating last minute changes and trying to pass off extra fees are now out of the business. The new licensing and continuing education requirements and overall regulatory environment is also a way to eliminate those sorts of scammers.
In the old days if a client had a legitimate change to request, the client would have called me. They would have requested their changes. I would have altered the file on my end in the system, and when they went to settlement they would see the changes as requested. Good enough, right? If it was not the way the client wanted it at settlement they could refuse to sign it! So why in the blazes do we need to have a client sign 25 pages of extra tree killing documents?
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