How the CFPB Has Changed The Beloved As-Is Contract

By now you have probably heard someone complaining about their closing taking longer due to new CFPB requirements. If you are not familiar with the new CFPB requirements you are late to the game, and should start familiarizing yourself with how these changes could impact the timing of your next deal.  Any closing involving a loan will be very different. As a real estate agent, investor, closer, etc., get ready. If you are prepared, the transition will be much smoother. As a result of these CFPB requirements that took effect October 3rd, the Far-Bar As-Is Contract all investors know and love has also changed. The changes to be noted and things to consider are as follows:

When to use the new Far Bar As-Is Contract

The new Far-Bar should be used on any deal in which Buyer will be submitting an application for a loan on or after October 3rd. Keep in mind, “any loan” involves those loans with conventional lenders. This does not apply to private or hard money loans.

What Has Changed

In order to keep this blog from being pages and pages long let me caveat this section by saying that I am giving the very short version of what has changed in each section. You must read the new Far Bar As-Is Contract in its entirety and take some continuing education courses if needed.

1. Extension of Closing Date in Paragraph 5

The closing date can be extended for not more than 10 days due to the newly mandated Closing Disclosure “CD” (what you used to call the “Settlement Statement”). The CD must be delivered a certain number of days prior to closing. If not, the close date may be extended to meet these new delivery requirements.

1. Financing in Paragraph 8
   1. The language “or may obtain a loan…” in Paragraph 8a has been eliminated. Buyer can still change his mind and get a loan, but that Buyer will not be granted the closing extension mentioned in Paragraph 5 if the CD delivery requirements are not met.
   2. The time in which a buyer has to obtain a loan commitment has been extended to 45 days because it is expected that obtaining financing will be a longer process as of October 3rd when the new rules take effect.
   3. Just because you get an extension under Paragraph 5 does not mean you will get an extension for the 7 days of close date requirement in Paragraph 8ii dealing with cancelling the contract due to failure to obtain a loan commitment .
2. Closing Costs, Title Etc. of Paragraph 9
   1. The default time for delivering title commitment or evidence of title has been changed. If left blank and Paragraph 8(b), (c) or (d) is selected then the default time has been changed to 15 days prior to closing if left blank. Note: If you have selected Paragraph 8(a) the default time remains 5 days prior to close date.
   2. Paragraph 9(c) deals with the reporting of title insurance costs. The costs and rates are the same, but may be allocated differently on your Closing Disclosure due to new CFPB requirements
   3. Back to the tricky Paragraph 8. If you need a survey and chose Paragraph 8(a) the time in which you have to obtain that survey is still 5 days prior to closing. If you chose any other option in Paragraph 8 your new default time will be 15 days.

Other Changes to Far-Bar As-Is

There are a few other changes to the As-Is such as the elimination of some addenda that never existed in the first place, abbreviated some changes etc., but the things listed above are your main changes and should be reviewed and noted for future use.

Good Luck. Better yet, get a good title company, real estate attorney or agent to be sure everything runs smoothly- then you won't need luck.