What is the CFPB Addendum and Why is it Necessary?
The CFPB Closing Disclosure addendum is a document that is often attached to standard form real estate purchase and sales contracts after October 1, 2015. It became necessary because the CFPB, the Consumer Financial Protection Bureau, passed TRID, TILA RESPA Integrated Disclosures, a law that changed the settlement practices for real estate purchases and sales.
The purpose of the CFPB Addendum is to set forth the respective responsibilities of Buyer and Seller, and to specify the consequences of failure to comply.
How does the CFPB Addendum modify the Real Estate Purchase and Sale Agreement?
Due to the strict requirements of TRID, lenders for Buyers have strict time line requirements. Since they have to have the Closing Disclosure acknowledged by the Buyer at least 3 business days before closing, most Lenders are requesting final figures from all parties 10 days and sometimes even 14 days before closing.
The CFPB Addendum contains terms that:
- Make parties aware that CFPB regulations of the Lender may cause delays ;
- Make parties aware that any delay in getting the Lender figures may result in financial hardship for the other party, and lists the information that must provided to the Lender;
- Waive any “time is of the essence” requirements in the contract;
- Seller to provide figures 10 days before closing or waive their right to collect the adjustments;
- Address discrepancies in real estate adjustment figures;
- Seller agrees to meet Buyer requirements for any discovered condition issues during walk through;
- Waive any Seller damages that may result from Closing Disclosure acknowledgement delays.
It should be noted that the CFPB Addendum is heavily in favor of the Buyer and drafted against the Seller. It protects the Buyer from Seller delays and Protects the Buyer from Lender delays, however, it places the burden of Buyer or Lender delays on the Seller without compensation.