The Housing and Economic Recovery Act (HERA) regulations go into effect July 30.
The purpose of these new regulations is to prevent deceptive lending practices in home mortgages (a good thing) but it’s a significant change and could cause delays in closing … especially as we’re getting used to it. Communication with our sellers and buyers is going to be very important. Some of the key changes are:
- The final Truth in Lending must be provided to the Borrower 3 days prior to closing which means lenders will have to get the closing instructions to the closing attorney much earlier.
- If the final APR increases by more than .125 from the initial APR, there is a 3 day waiting period. Loans will need to be locked earlier.
- Original truth in lending disclosures must be made at least 7 days in advance, so that will be the shortest loan application to closing timeframe if financing is required.
- Borrowers must be presented a copy of their appraisal 3 days prior to closing, but this requirement may be waived.
The mortgage industry is changing in other ways as well as it evolves toward safeguards to protect the consumer and the lender. Lenders now have to go through an appraisal pool rather than calling the appraiser of their choice.