Housing & Economic Recovery Act (HERA)
Take Notice! - New government regulationis going into effect on July 30, 2009. This regulation requires all mortgage lenders to provide the Truth in Lending (TIL) disclosures to borrowers according to a defined schedule. The schedule may alter the borrowers' closing date expectation. The regulation is in the best interest of our borrowers, so it's important we all understand and implement it thoughtfully and consistently. In addition, we all need to work to ensure the changes that will result from this regulation are understood by our borrowers!
LOANS CANNOT CLOSE UNTIL AT LEAST SEVEN DAYS HAVE PASSED FROM DATE OF APPLICATION!
Dont Believe all the hype! - There is no more closing a loan in 5 days! (Was there ever?) Lenders must issue the initial TIL disclosure at least 7 business days before loan consumation (document signing). Regardless of how the initial TIL is provided to the borrower, closeing documents cannot be signed earler than 7 business days after the initial TIL has been issued.
Changes start the 3 Day Clock AGAIN - If there are any changes to the loan parameters that affect the Annual Percentage Rate (APR) on the TIL, the resulting APR must be compared to the latest TIL provided to the borrower. If there is an increase greater than .125% in the APR, the lender must provide a corrected TIL to the borrower. Fees considered to be finance charges that are used in the APR calculation include but are not limited to discount points, lender fees, Life of Loan flood certification coverage, settlement agent or attorney fees. Borrowers MUST be provided three business days to review this amended TIL prior to loan closing. This is new, current, FEDERAL LAW - Banks will be fined $4,000 for errors.
Fees Can't be collected until disclosures are received - The regulation prevents the collection of all fees from the borrower, except the expected cost of the credit report, until the initial TIL has been receieved by the borrower. This may delay the appraisal orders or orders for other essential services; therefore it's very important we work together (lenders, agents, attorneys) to set the borrowers' expectations for closing accordingly. This will eliminate the shopping around for rates and the non-contact internet loans. If the initial TIL is delivered to the borrower face-t-face, fees for these services can be collected at that time.
The changes this regulation brings are positive ones for our borrowers. This new regulation strives to ensure that borrowers have a clear understanding of the financial obligation they are about to assume.
Again, if the initial or latest TIL and the closing paperwork's APR changes .125% or more (1/8th of a percent) the closing WILL NOT take place. Think of the domino effect here - the movers that are waiting, the contingent sale, etc etc. PLAN AHEAD!
For more information, visit www.HUD.gov or www.Remax-Greenville-NC.com for updated alerts!
Information courtest of Deryck Wilson, REALTOR with RE/MAX Preferred Realty
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