PrimeNews

Changes in government guidelines may affect your closing dates

The mortgage industry has been one of evolution and change in recent months. While all of these changes are designed towards benefitting the borrower, PrimeLending wants to ensure that none of these new requirements negatively impact your timeline towards purchasing the home you’ve always wanted. Below is some important information that will make you aware of recent changes that affect the loan process.

NOTE: These regulations are subject to change – Please check this site for any future updates.

Impacting Legislation: HVCC and HERA

Two new major pieces of legislation serve as strong influencing factors on the home buying process.

In 2008, the Home Valuation Code of Conduct (HVCC) was adopted by Fannie Mae and Freddie Mac.

Effective as of May 1, 2009, this is intended to reinforce the precision and autonomy in the appraisal process. Under HVCC, appraisers are protected from outside pressures in order to provide better and more accurate appraisals. Additionally through HVCC, it is required that homebuyers receive enough time to thoroughly review information in their appraisal by providing borrowers a copy of their appraisal report no less than three (3) days prior to the closing of their home loan transaction. (The sale of FHA/VA, Section 184 Native American, and Section 502 Guaranteed Rural Housing are exempt from the Code.)

Passed by Congress in 2008, the Housing Economic Recovery Act (HERA) was designed for three main purposes:

• 1. To include extra steps in the home loan process to help prevent deceptive lending practices
• 2. To outline more direct and clear guidelines and governing structure for the real estate industry
• 3. To provide more information directly to the homebuyer for their own protection

Going into effect on July 30, 2009, HERA contains an amendment to the Truth-In-Lending Act (TILA), the Mortgage Disclosure Improvement Act (MDIA). This act adjusts the period of time in which homebuyers may be charged fees and amends timing, content, and re-disclosure requirements for the early and final disclosures.

Four Main Changes You Should Know

• (A) A closing date traditionally has been set by the homebuyer and seller. Those parties involved in facilitating the transaction would then do all that needed to be done to reach that date. Under the new legislation, a closing date still can be included in purchase contracts; however, a home purchase cannot close any sooner than seven (7) business days after the lender has issued initial mortgage disclosures to the borrower which must be delivered or placed in the mail no later than three (3) business days after an application is received. If the required disclosures are mailed, they are considered officially received three (3) business days after they are mailed. In cases when disclosures are sent via overnight mail, they are not documented as "received" until the following business day; it is at that time fees may be collected.
• (B) In the past, lenders have been able to collect upfront fees once an application has been submitted (either online, by phone or in person). With the new guidelines, fees may not be collected by the lender until the homebuyer has received the initial loan disclosures. The credit report fee is the only exception to this rule; it may be collected at the time of application.
• (C) Re-disclosure is required if the APR at the time of consummation increases from the APR disclosed earlier by more than: 1⁄8 of 1 percentage point in a regular transaction; or 1⁄4 of 1 percentage point in an irregular transaction (ie. ARM loan). This will trigger the three (3) business day waiting period. If a change in terms does not make the APR out of tolerance, then you must re-disclose all of the changed terms but this does not trigger the three (3) business day waiting period prior to consummation. Due to the length of time that can be involved in a home purchase transaction, the APR is subject to a number of influences including: a change in the loan amount, a change in the product, an unlocked rate, a rate re-lock, a change in the closing date or changes in fees. Because of these various determining factors, it is vital that the estimated fees are documented accurately.
• (D) Under the new legislation, a copy of the appraisal must be provided to the homebuyer a minimum of three (3) business days before closing. The homebuyer may relinquish the requirement to receive the appraisal within three (3) business days if they do not consider it essential.