HERA – Housing and Economic Recovery Act
On July 31st, 2009 a new regulation published by the Federal Reserve Board will begin that will drastically change the process of obtaining a home loan. At least on the originators side of the transaction that is. Even though the changes have no new hoops for the borrowers to jump through, the hoops the originator will jump through will certainly affect the borrower and everyone else attached to the transaction. These regulations will impact your closing dates on all transactions for primary and 2nd homes that require financing.
The New requirements dictate to lenders and brokers the following:
- When up front fee’s can be collected
- When an appraisal can be ordered
- When a new Truth in Lending Disclosure must be re-issued
- When a copy of the appraisal must be delivered to the borrower
- When a loan can close
The earliest a transaction can close is 7 business days from when the initial disclosures are received by the borrower. With that said even 15 days will be difficult to do.
After the Initial application is taken the lender must mail the upfront disclosures and wait 3 business days before collecting any fees aside from a credit report fee. After the 3rd business day the appraisal may be ordered and the fee collected. Once the appraisal is received, the borrower must be given a copy and time to review. This means another 3 days if mailed and 3 days to review for a total of 6 business days. On the 7th business day the loan may proceed.
If at any time the APR increases from the initial disclosure by more than .125%, a new Truth in Lending must be re-disclosed to the borrower and again start a 3 day clock, if mailed, and 3 days for review. The estimation of up front fee’s is crucial. Getting to the closing table andadjusting escrow fee’s will delay your loan by 7 business days as a new Truth in Lending is mailed and reviewed.
Note: For applicable refinances the 3 day rescission is in addition to this, so that makes the wait 9 business days.
Some Potential impacts to the APR:
- Unlocked rate and rate changes from initial disclosures
- Change in loan amount
- Loan product change
- Change in closing date
- Change to any fees
The only time period that can be waived is the appraisal review period of 3 days, and must be done so in writing by the borrower. The only other way to speed up the process is to hand deliver the appraisal and disclosures, and get a signed receipt from the borrower to include in the loan file. This will save the 3 days you have to wait when mailing the items. Even still you can see how days begin to add up.
30-45 day escrows will become even more common than they are today, as closing early becomes more and more difficult. Add in lender turn times, and one mistake in timing can easily cost you a week or more.
Bankers (like myself) have an advantage over brokers here as brokers have to wait for the lender they are submitting to, to send out the disclosures. So Bankers may have a 3-4 day advantage in this example.
If you have any questions or comments please feel free to email me or use the comment feature below. If you are a Realtor I would be happy to present this information to you or your office in person, whether we work together or you already have a lender relationship, we all need to understand the new requirements, as our clients depend on this.
Concord, CA Contra Costa County
Tags: california, Concord ca, envoy mortgage, HERA, home loans, loans, matt steinmetz, mortgage
Loading ...