Housing and Economic Recovery Act (HERA) Mortgage Regulations

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 borrowers’ closing date
expectation. The regulation is in the best interest of our borrowers,
so it’s important we all understand and implement it thoughtfully
and consistently. In addition, we all need to work together 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 loan consummation (document signing).
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 borrowers’ 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.
The changes this regulation will bring are positive ones
for our borrowers. This new regulation strives to ensure
borrowers have a clear understanding of the fi nancial
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.