Here's a grat post by my associate, Christianne Gordon. Very informative!
Did you think your contract dictated the closing date? Thanks to HERA, HOEPA, TILA and Regulation Z, that power has now been usurped and handed to your lender.
As of July 30, 2009, amendments pertaining to the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA) take effect. They new rules were written to make the process of obtaining a mortgage more transparent to consumers, and to protect consumers by keeping them more informed, and thus making them more confident about the process of obtaining a mortgage. These regulations are in addition to the HVCC which was enacted May 1, 2009.
Here's the deal: HERA amends the Truth in Lending Act (TILA) through Regulation Z (where do they make up these names and acronyms??). The meat of HERA regulates the early and final disclosure of mortgage fees and the timing of fees. The importance of this amendment cannot be overstated. Although your real estate contract may have a specific closing date, if the mortgage lender has not complied with HERA, then it will NOT close. The agents, seller and buyer no longer have control of the closing date!
HERA also prohibits any up-front fees being collected whatsoever (with the exception of a credit report fee) until all initial disclosures are received. In order to get a loan on a 'fast track', buyers used to be able to provide a lender with a credit card to order an appraisal, etc. Not anymore. Now initial disclosures must be in the buyer's hands prior to fees being collected.
HERA also requires that the buyer receive a copy of the appraisal at least 3 days prior to closing. This is something the buyer can waive, but let's face it, in this market, I don't see many buyers waiving this right. They are going to want a copy of that appraisal, and I'd even speculate that many will attempt to read it.
Here's the DOOZY: If the Annual Percentage Rate (APR) disclosed on the Truth in Lending Disclosure changes more than 0.125%, from the initial disclosure, the disclosure must be revised and reissused to the borrower. Then the buyer must wait 3 days before they can close. So what are things that can affect the APR and trigger this unfortunate delay? Here's a short (and definitely NOT exhaustive) list:
- Re-inspection fees put on the HUD
- Wire Transfer Fees
- Home Warranty
- Any loan fees (origination, processing, underwriting, application, discounts points, lock fees)
- Escrow Fee
- VA Funding Fee
- Recording or Reconveyance fees
- HOA fees
- Transfer taxes
Basically, the deal is that you'd better have your fees straight UP FRONT and work with a reputable lender, otherwise deals are GOING TO GET DELAYED. In the case of consecutive closings, this can be a huge issue, and I can readily see sellers looking to buyers, and buyers looking to agents, escrow companies and lenders to eat whatever fees are changing the APR to close on time.
Buyers - if you're thinking about buying a home, make sure you work with a knowledgable reputable lender. Quiz them on the changes coming up with Truth in Lending and Regulation Z. And lastly, when buying a home, always talk to more than one lender, because you get what you pay for. Sooner than later, that may be as simple as closing on time.