In 2008, the Home Ownership and Equity ACT (HOEPA) and the Housing and Economic Recovery Act (HERA) were passed by Congress, and the Federal Reserve board published the regulations under the Truth in Lending Act. These regulations were written to provide a more transparent, level and fair regulation of the real estate industry; to add additional steps to help prevent deceptive lending practices; and to protect consumers by making them more informed – and therefore more confident – in their home financing choices. In addition, Fannie Mae and Freddie Mac protections, and enhance the overall integrity of the valuation process.

 

 

Effective May1 ,2009 HVVV promotes the accuracy of appraisals by shielding appraisers from undue influence, and ensuring that borrowers have sufficient motive of appraisal content by requiring that borrowers receive a copy of their appraisal reports no less than three days prior to the closing of their loan absent a borrower waiver of this requirement.

 

Effective July 30, 2009 HERA amends the Truth in Lending Act (YIL), implemented through Regulation Z, has a number of provisions including the Mortgage Disclosure Improvement act, which changes the Truth in Lending requirements surrounding early and final disclosures to homebuyers and addresses the timing of when fees can be charged.

 

1.     If the homebuyer is financing the property, these new regulatory and investor guidelines will impact – and could even dictate – the closing date. Historically, homebuyers and sellers would agree on a closing date, and then service providers –including lenders – would work as best as they could toward meeting that date. Going forward, purchase contracts can still be written with a specific closing date in mind, but all parties need to take into account t that the earliest any home purchase transaction can close is 7 business days after the homebuyer is issued his or her initial mortgage disclosures from the lender. (Note: At Wells Fargo Home Mortgage, Saturdays, with the exception of federal holidays, do count as a business day for the purpose of disclosures only.) 

 

2.     Upfront fees cannot be collected by the lender (except for a credit report fee) until the initial disclosures are received. If the disclosures are overnighted, they are considered “received” the next business day- (excluding Saturdays) allowing the fees to be collected on the following business day. Historically, upfront feed could be collected immediately at the time of application for both in person and phone applications. Moving forward, the homebuyer must receive his or her initial disclosures before upfront fees can be collected. The only exception is the credit report fee which can be collected at application. 

 

3.    The homebuyer must be approved with a copy of his or her appraisal a minimum of 3 business days prior to closing. To help expedite the process, many mortgage companies have elected to have a copy of the appraisal issued at least 3 business days prior to the mortgage closing. This means the homebuyer may receive his or her appraisal before or simultaneous to the lender receiving their copy. If the homebuyer believes that 3-business-day required review periods is not necessary for whatever reason. He or she has the right to waive that requirement. 

 

4.     An increase of more than .125% in the Annual Percentage Rate (APR) from the initial Truth in Lending Disclosure (TIL) requires the TIL disclosure to be revised and reissued to the homebuyer. The homebuyer must receive a revised TIL disclosure at least 3 business says before closing, providing the homebuyer with the time required to determine if the homebuyer is comfortable with his or her loan choice. If mailed, the TIL disclosure is considered “received” 3 business days after mailing.

 

Clearly it is important to deal with a lender who knows what they are doing.  Make sure you have the right team assembled!