7 Critical Things Idaho Realtors Need To Understand To Protect their Clients, their Business, and their Income.

New Mortgage Laws:  7 Critical Things Idaho Realtors Need To Understand To Protect their Clients, their Business, and their Income.

By Dean Tucker, Idaho Regional Manager, Waterstone Mortgage

There are a number of new laws in place is to protect consumers who apply for a mortgage.  One of the most important changes involves mortgage disclosures and new mandatory waiting periods which recently became federal law.  By law, the consumer is now given "time" to review all disclosures. This is intended to provide an extra layer of protection for consumers by imposing a mandatory waiting period before a loan can close.  Here is a summary of what you need to know:

The "Nuts And Bolts" Of How It Works:

•1.      UPFRONT DISCLOSURES:  Borrowers must wait at least 7 business days after the Truth-In-Lending disclosure is issued until they can close on their mortgage loan.  Add 3 days if the disclosures are provided via mail.

•2.      REVISED DISCLOSURES:  If there are any changes to the terms of the transaction or the loan, new disclosures must be issued and the borrower must wait an additional 3 days until they can close on their mortgage loan.  Add another 3 additional days if the new disclosures are provided via mail.

•3.      BROKERED LOANS:  If the loan officer works for the same company that will be funding the loan, borrowers do not need to be concerned about any additional waiting periods.  If the loan officer is "brokering" the loan to another company, then additional waiting may occur.  When a loan is being brokered, the date of disclosures is based on the date that the funding lender issues disclosures rather than when the originating loan officer issues them.   Most banks and direct mortgage lenders fund the vast majority of the loans that they originate, and as such these additional waiting periods don't typically apply.  In an effort to always provide out customers with the best possible mortgage options, even banks will occasionally "broker" certain niche loan programs.  Examples of these programs include, but are not limited to, some "State Bond" loan programs for first time home buyers, reverse mortgages and construction loans.

•4.      APPRAISAL DISCLOSURE:  In addition to the mortgage disclosure requirements, the lender must also deliver a copy of the appraisal to the borrower at least 3 business days before closing.  Add 3 days if the appraisal is provided via mail.

•5.      ELECTRONIC DELIVERY CONSENT:  Borrowers can consent to receiving documents via email and shave 3 days off the waiting period.  Lenders will require a signed "Electronic Delivery Consent" form on file to deliver documents via email.

Top 7 Things You Need To Understand To Protect Your Clients And Yourself:

•1.      CLOSING DATE:  I know this is a tough one, but when negotiating the date of closing, make sure it's flexible and there are no penalties for not closing on the specified date.  The waiting periods are "federal law" and preclude the terms in the written contact.

•2.      DOWN PAYMENT:  Last minute down payment changes will delay your closings.

•3.      RATE LOCK:  "Floating the interest rate" until the last minute could delay your closings.  Encourage your clients to lock in at least 7 to 10 days before the projected close date.  In addition, last minute changes could also trigger the need for lock extensions, which could increase the loan costs and trigger even more disclosure waiting periods.

•4.      SHOPPING:  Switching lenders at the last minute will delay closings.  The disclosure process starts over again with another lender.

•5.      WAIVERS:  There are no waivers to the waiting period-unless it's a hardship with tens of thousands of dollars at stake because the law is written as such that a ‘waiver" will be virtually impossible to obtain.  

•6.      TRANSACTIONAL CHANGES:  Notify your loan officer if anything...and I mean ANYTHING changes on the purchase agreement.  This could require a re-disclosure and another waiting period, and as such could delay the closing.  See examples below.

•7.      THIRD PARTY FEES:  Since the lender is responsible for estimating and disclosing third party fees (appraisal, credit report, closing escrow company), there may be last minute changes that are out of their control.

The bottom line:  The days of negotiating the deal at the last minute ARE OVER-unless all parties involved (buyers, sellers, etc.) are prepared to delay the closing date.

CHANGES THAT MAY TRIGGER RE-DISCLOSURE REQUIREMENTS:

Transactional Changes - Examples:

            Sales Price

            Loan Amount

            Down Payment

            Closing Date

            Seller paid closing costs (sales concessions)

            Loan Program (Conventional, FHA, VA RD, IHFA)

            Type of Property (Single Family, 2-4 Units, Condo, Manufactured homes, etc)

            Type of Occupancy (primary residence, second home, investment property)

Lender Changes - Examples:

            Interest Rate (floating rate vs. locked rate)

            Origination Fee (finalized when you lock)

            Discount Points (finalized when you lock)

            Lender Fees (Processing, Underwriting, Doc Handling, Courier Fees, etc)

Third Party Changes - Examples:

            Flood Certification Fees

            Mortgage Insurance

            Closing Agent's Misc Fees (Doc Retrieval Fees, Courier Fees, Mailing Fees, etc.

            Escrow Company's settlement closing fee

(The above examples are not all inclusive of every item that might trigger re-disclosure requirements.)

As you can see we are living in a crazier mortgage world than ever before. The keys to success: work with a knowledgeable fulltime mortgage professional, start the loan process early, don't try to close a transaction faster than the new laws will allow (a reasonable amount of time is 30 days from date of fully excepted contract), and keep a consistent flow of communication throughout the process!