HUGE LOAN CHANGES COMING!! - HERA/HOEPA
HERA/HOEPA - Background Information
In 2008, the Home Ownership and Equity Protection 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 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.
HOEPA - Effective July 30, 2009
Amends the Truth in Lending Act (TIL), implemented through Regulation Z. Has a number of provisions including the Mortgage Disclosure Improvement Act, which changes the Truth in Lending Act requirements surrounding early and final disclosures to home buyers and addresses the timing of when fees can be charged.
Four key elements you need to know
1. If the home buyer is financing the property, these new regulatory and investor guidelines will impact-and could even dictate-the closing date.
Historically, home buyers and sellers would agree on a closing date, and then service providers - including lenders - would work as best 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 that the earliest any home purchase transaction can close is 7 business days after the home buyer is issued his or her initial mortgage disclosures from the lender. If the application is taken by phone - and everything went perfectly, the earliest closing date would be 7 business days after application. (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-allowing the fees to be collected on the following business day.
Historically, upfront fees could be collected immediately. Starting July 30, 2009, upfront fees can be collected immediately when the application is taken in person and the home buyer receives his or her initial disclosures. The only exception is the credit report fee which can be collected at application.
3. The homebuyer must be provided with a copy of his or her appraisal a minimum of 3 business days prior to closing.
To help expedite the process, Wells Fargo Home Mortgage has elected to have a copy of the appraisal issued directly to the homebuyer - and the homebuyer must receive the appraisal 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 the 3-business-day required review period 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 home buyer must receive a revised TIL disclosure at least 3 business days 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.
Considering that many things occur and may be changed or finalized throughout the course of the transaction, there are a number of things that can impact the homebuyer’s APR. Therefore it is critical on the front end to ensure that estimated fees are as accurate as possible.
