Information for you about the government’s Housing and Economic Recovery Act (HERA)

New HERA regulations may affect your closing expectations.

We are bing told that a new government regulation is going into effect on July 30, 2009. This regulation requires all mortgage lenders and brokers to provide Truth in Lending (TIL) disclosures to borrowers according to a defined schedule. This schedule may alter your clients closing date expectation. We all looking to work together with real estate agents, attorney's and everyone associated with the closing to ensure the changes that will result from this regulation are understood by our borrowers.

Loans cannot close until at least seven days have passed from date of application.

Lenders and brokers must issue the initial TIL disclosure at least seven business days before the final loan documents are signed. Regardless of how the initial TIL is provided to the borrower, closing documents cannot be signed earlier than seven business days after the initial TIL has been issued.

Changes start the three-day clock again.

If there are any changes to the loan parameters that affect the Annual Percentage Rate (APR) on the TIL, the resulting APR must be compared to the latest TIL provided to the borrower. If there is an increase greater than .125% in the APR, the lender must provide a corrected TIL to the applicant. Fees considered to be finance charges that are used in the APR calculation include but are not limited to discount points, lender and broker fees, Life of Loan flood certification coverage, settlement agent or attorney fees. Borrowers must be provided three business days to review this amended TIL prior to loan closing.

Fees can’t be collected until disclosures are received.

The regulation prevents the collection of all fees from the borrower, except the expected cost of the credit report, until the initial TIL has been received by the borrower. This may delay appraisal orders or orders for other essential services; therefore it’s very important we work together to set your clients expectations for closing accordingly. If the initial TIL is delivered to the borrower face-to-face, fees for these services can be collected at that time.
This new regulation strives to ensure borrowers have a clear understanding of the financial obligation they are about to assume. We look forward to working with you to make sure borrowers have ample opportunity to review their loan documents, are well informed about the details of their real estate transaction before consummation, and remain confident in their home financing decision. Please give me a call or email if I can be of any help or answer any questions.

Keep in mind in this market, this could change tomorrow but I will keep you posted!