Closing Timelines and Federal Regulations

Consumer protection regulations were put in place in 2009 to ensure that homebuyers receive better information, especially regarding cost disclosures, earlier in the mortgage process.

 

Revised Truth in Lending disclosure requirements took effect July 30, 2009 and the timing of your closings may be impacted.  With these regulations you’ll want to plan for at least a 30-day close if the homebuyer is financing the property.  Regarding potential closing dates, it will be important to set realistic expectations for all parties early in your transactions.

A flier with the basic points about the 2009 Truth in Lending changes has been created for KCRAR Members to use when talking with clients.  Go here for the flier.  After discussing it with your broker, you may want to add your logo and personal information in the open space at the bottom.

More about the regulations:

Lenders are now required to comply with revised Truth in Lending Act good faith estimate (“early disclosure”) requirements which will:

 

 

  • require delivery or mailing of the early disclosures within three business days of receiving a consumer’s mortgage loan application.  A lender also must wait until at least seven business days after delivery of the disclosures before consummating the mortgage loan.
  • require corrected disclosures to be delivered at least three business days before consummation if the annual percentage rate (APR) provided in the early disclosures changes more than .125% from the initial Truth in Lending Disclosure.
  • expand the requirements to mortgage loans secured by any dwelling of a consumer.  The requirements no longer are limited to a consumer’s “principal dwelling.”  The early disclosure requirements also now cover refinancings and home equity loans.
  • prohibit a lender from charging a consumer any fee, except to obtain a credit report, until after the early disclosures have been provided.
  • permit a consumer to expedite the closing of a mortgage loan subject to the early disclosure provisions to address a personal financial emergency, such as foreclosure.
  • inform a consumer that he or she is not required to complete the transaction because the consumer has received the early disclosures or applied for a loan.

 

Please discuss these new provisions with your lender or mortgage broker as well as your settlement agents to avoid unnecessary delays during the transaction.  Provide the settlement agent information to the lender as early in the process as possible.  It’s critical that any third party fees that impact the APR are accurate.

 

For more information, go to http://www.fdic.gov/news/news/financial/2009/fil09026.html.  Also see this Summary of the Mortgage Disclosure Improvement Act published by the Mortgage Bankers Association.

 

 

Other regulatory changes have been implemented by Fannie Mae and Freddie Mac’s adoption of the Home Valuation Code of Conduct (HVCC) on May 1, 2009.  NAR Government Affairs is taking several steps to raise concerns about implementation of the HVCC, its effect on consumers, and the use of appraisal management companies (AMCs) by lenders in some areas of the country.  HVCC regulations also have the potential to affect closing timelines.

 

Go to www.realtor.org/hvcc for more information.

 

Your REALTOR® Associations will keep you apprised as this federal issue develops.

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