Here they go again.. our government try to "help".Here are more regulations from the government!!! As you know, I’m committed to keeping my business partners informed about changes occurring within the mortgage industry.
The Housing and Economic Recovery Act of 2008 (HERA) was developed to protect the mortgage consumer when purchasing a home. The Act contains provisions that revise the Truth in Lending Act under rules known as the Mortgage Disclosure Improvement Act (MDIA). These rules apply to all loan applications received on or after July 30, 2009. (Yes there are 31 days in July but we are talking about the government.)
This applies to primary and second homes only!
Initial Truth in Lending (TIL) Disclosure
The initial TIL disclosure has been amended to require specific language to notify the consumer that they are not required to complete the loan agreement merely because they have received the disclosure or signed a loan application.
Waiting Periods - changed and defined
For all timing requirements set forth below, “business days” are Monday through Saturday and exclude all legal federal holidays (Bank Holidays).
The revised rules implement waiting periods for the collection of fees and loan closings:
- Creditors, mortgage brokers and any other person are prohibited from imposing any fee, other than a reasonable credit report fee, until the consumer has received my bank’s initial disclosures.
- The loan cannot close (document signing) until 7 business days after the initial TIL disclosure has been mailed.
- The loan cannot close until 3 business days after a re-disclosure TIL is received (if applicable).
- If the disclosures are delivered via regular mail, the disclosures are considered received by the borrower three 3 business days after they are mailed. If e-mailed, FedEx, etc. the regular mail time frame disclosures apply!
Annual Percentage Rate Changes (APR) If the APR increased or decrease by more than 0.125% from the previously disclosed APR, a re-disclosure TIL must be provided to the consumer. The loan cannot close (document signing) until 3 business days after the re-disclosure TIL is received by the borrower.
Okay, what do we do? It’s simple – we can no longer do extremely quick loan closings. (Thanks to Government Regulations -HERA) This means (you) must write contracts with longer closing dates and Mortgage Professionals must write tight loan applications and GFE’s. A longer Purchase and Sale contract means 35-40 day closings.
We will need a pre-HUD from your Closing Attorney or Settlement Company soon as possible, that’s accurate!! If they add junk fees (electronic download fee, cover letter fee, etc.), or higher Attorney Fees, that can push the APR over the top and we will have to delay closing.
Talk to your lender to discuss the file to see what hurdles he/she envisions, and worse case scenario, you close an extra 10 days late. However, it is important that your lender writes an air tight loan application and accurate GFE to avoid the re-disclosure delay of 3 days (or more) due to a .125% increase in APR.
On a personal note… I reviewed my last 18 loans and only one would have had to be re-disclosed under the new law. :)
I am happy to answer any questions you may have regarding these new guidelines. So please, do not hesitate to call me directly at 804-615-7773 - Kyle
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