Below is an update on the Federal Home Mortgage Disclosure Act:
The Federal Home Mortgage Disclosure Act has changed. Changes were signed by the President last July (2008) that took affect in May 2009 affecting appraisers and the ordering process and the communication they can have with lenders is regulated as of May 2009 for all lenders. In July 2009 the Truth In Lending changes take place which include provisions such as the Mortgage Disclosure Improvement Act. HERA is the Housing Economic Recovery Act and HOEPA is the Home Ownership Equity Protection Act. To try to boil it down for you, it was meant as an overall improvement on the transparency for the consumer with regards to mortgages. It affects ALL lenders (and brokers) doing closed end loans secured by real estate. Some of the things you will notice about the paperwork are some changes to the HUD (4 pages now) and the Truth In Lending Disclosure (4 pages now).
Why is this happening? It was meant to provide a more transparent, level and fair regulation of our industry, prevent deceptive business practices, create consistent lending practices among all lenders, protect consumers and make them better informed during the transaction in hopes of making them more confident of their decisions. This is all good for the consumer. The important part is for us to prepare them for the "new" era of lending and point out the pitfalls of where a transaction can get sideways so as to try to avoid missing closing dates since the timelines are set under the Federal guidelines.
The attached information is provided for you to get some high points. With this sweeping change, of course we will all have some learning curves to get in sync with the new process. As we learn better how to work with the new system, we can put identifying marks in our calendar to try to avoid pitfalls and missed closings. As you will see, things like a customer with an unlocked rate, changes in loan amounts, a product change, rates returned to float and relocked due to market improvement, a change in closing date or changes to fees (inclusive of settlement agent fees) are just a few of the things that can affect the closing date. New construction potentially has the issue of missing closing dates if the home is not finished ahead of schedule (sometimes they finish the day prior or day of). They may be delayed with appraisal completion and disclosure timelines or last minute price changes.
Now more than ever communication between all parties will be critical. The lender and the agents and the borrowers all must work together to make sure that changes in price of the home, changes of closing dates, changes to down payment or product changes etc etc will need to be communicated as soon as possible between all parties. With that said, please review the calendar in the attachment, consider the buyer if you are the listing agent and write offers with firm closing dates well out in excess of 30 days (safety of contract helps both sides). I know this goes towards moving backwards from the past years of speeding the process up, but we all have to play when it comes to Federal Regulation. Given the volume, time for appraisals, title and any unforseen issues of title clearing, the disclosure time frames, underwriting turn times and new Federal Guidelines, together if we all stay informed from borrowers to the agents to the title company, we can still do the great job we have all done over the years for our clients.
If you have any questions feel free to contact me!