NEW GOVERNMENT REGULATIONS MAY IMPACT YOUR CLOSING DATE
When it comes to the $8,000.00 Federal First Time Home Buyer Tax Credit, you can't afford to wait until the last minute to purchase a new home. The government changed some of the laws and regulations associated with mortgage lending including the adoption of the Home Ownership and Equity Protection Act ("HOEPA"), the Housing and Economic Recovery Act ("HERA"), new Truth in Lending Act disclosure regulations, and the Home Valuation Code of Conduct ("HVCC"). To view the new Truth in Lending Act regulations, click on: Revised TILA Regulations.
Here is a summary of the new regulations:
- Initial Loan Disclosures: Within three business days after the submission of a loan application by the borrower to the lender, the lender must provide the borrower with the initial Truth in Lending Act disclosures.
- Mandatory Review Period: The lender may not close the loan until seven business days after the delivery of the initial Truth in Lending Act disclosures.
- Revised Disclosure Requirements: If the APR disclosed on the initial Truth in Lending Act disclosure increases by more than .125%, the lender must provide the borrower with revised Truth in Lending Act disclosures at least three business days prior to the closing date.
- Appraisal Report: The lender must provide the borrower with a copy of the appraisal report three business days prior to the closing date.
POTENTIAL IMPACTS ON THE APR
The borrower, their agent, and the lender must be aware of these requirements and must manage the loan process to minimize the possibility of delays in closing dates attributable to changes in the APR. Here are common occurrences that may impact the APR and may thereby trigger the requirement that the lender provide revised Truth in Lending Act disclosures to the borrower with or without the three day waiting period after the delivery of the disclosures:
- Unlocked Rate
- Change in Loan Amount
- Loan Product Changes
- Rate Re-Lock due to Market Improvements
- Change in Closing Date
- Changes in Loan or Settlement Fees
HOW TO AVOID DELAYED CLOSING DATES
In today's lending climate, it is important that the purchaser/borrower, real estate agent, lender, and settlement agent work together to ensure timely closings. Each participant in the sales transaction has a role to play. Here are some general tips and suggestions:
For the Borrower/Purchaser:
- Obtained a credit based pre-approval letter prior to searching for a new home.
- Plan for at least a 30 day close.
- Request a written time line of the loan process so you know and understand the deadlines for each step in the loan process and understand the impact that missed deadlines may have on your closing date.
- Review the appraisal requirement and consider whether or not to waive the 3-day review period prior to closing.
- Select your loan product and lock your interest rate at least 10 business days before the closing date.
For the Real Estate Agent:
- Set realistic expectations by providing the borrower/purchaser with a time-line with milestone dates associate with the loan process.
- Discuss the new regulations with the borrower/purchaser specifically explaining what actions or changes might impact the closing date.
- Manage the loan process, including missed deadlines that could impact the closing date.
- Confirm that accurate settlement fees are promptly sent by the settlement agent to the lender at least 10 days prior to the closing date.
For the Lender:
- Promptly obtain information from the settlement agent regarding closing fees.
- Promptly issue the initial Truth in Lending Act disclosures at least 3-days after the submission of the loan application.
- Confirm selection of the loan product and lock the interest rate at least 10 days prior to the closing date.
- Promptly issue any revised Truth in Lending Act disclosures at least 3-days prior to the closing date.
For the Settlement Agent:
- Provide the lender with accurate settlement fees upon receipt of the initial title order.
With a little planning, these new regulations shouldn't impact you closing date.