Why New Government Lending Regulations Could Affect Your Closing Date.
July 27th, 2009 categories: Mortgage News, Special Announcements
On July 30, 2009, the new Housing and Economic Recovery Act (HERA) laws will go into effect. They require all mortgage lenders and mortgage brokers to help prevent deceptive lending practices and protect customers by helping them become more informed. Here is a basic summary of how it could affect future closings…
Important Information About The Housing and Economic Recovery Act (HERA)
A new government regulation will go into effect July 30, 2009. These regulations may impact your buyers’ closing expectations, so it is imperative that we all understand these changes.
Background
On July 30, 2008, Congress enacted the Housing and Economic Recovery Act, which contained a section called the “Mortgage Disclosure Improvement Act” (MDIA). Also on July 30, 2008, the Federal Reserve Board published its amendments to Regulation Z, which were scheduled to take effect October 1, 2009. the Federal Reserve Board issued its final regulations to implement MDIA on May 8, 2009. These regulations moved some of the regulations scheduled to be implemented October 1 be moved up to July 30.
Initial Disclosure and Closing Dates
The initial TIL is still required to be issued within three (3) business days of loan application ; however, the borrowers are now required to have at least seven (7) business days (excludes Sunday and legal holidays) from the date the Truth in Lending (TIL) is issued until the date of closing. Regardless of the delivery method of the TIL, closing documents cannot be signed until at least seven days after it was issued.
Redisclosure and The Three-Day Rule
Redisclosure of the TIL is required if there is an increase of more than .125% in the APR or more than $100 in finance charges on a fixed rate loan. For ARM loans, redisclosure is required if the APR increases more than .25%. From the date the borrowers receive the redisclosed TIL, there must be a minimum of three (3) business days before loan closing documents may be signed. Fees considered in the APR calculation include, but are not limited to, discount points, lender fees (origination, underwriting, processing, application fee), Life of Loan flood certification coverage, and prepaid interest charges.
Fees Collection
No one (broker, creditor, third party) may collect a fee from the borrower, with the exception being a credit report fee, until the initial required TIL has been received by the borrower. This regulation could potentially delay appraisal orders or orders for other essential services.
Three-Day Rule Defined
A disclosure is considered to be received by the borrower as of either the signature date of the documents or three (3) business days after mailing of the documents.
The Bottom Line
Because these regulations are to ensure that our borrowers well informed about their pending financial obligation, these changes are certainly positive ones. It is, however, important that we work together in setting the buyer’s expectations about timing for closing date and appraisal services.
Keeping you informed!
Will the lenders accept our acknowledgment of redisclosure or only theirs to start the 3 day rule?
Denise K Gay
Allied Home Mortgage