HERA Mortgage Disclosure Improvement Act

Many new government laws and other changes are occurring in the mortgage industry to help ensure the home financing process is transparent and understandable to customers, like you. Compliance with these new requirements is mandatory for all mortgage lenders and brokers and should offer the purchaser the information and time to make more informed decisions about the home financing product they choose.

Historically the closing dates for a home purchase transaction were determined by the buyer and seller. Since the new guidelines impose certain required disclosures and subsequent “wait periods”, purchasers, their Realtors®, and loan officers, must consider how the new mandatory timelines may impact the mortgage application process and the settlement date.

For example, some of the new legislation that takes effect July 30, 2009, provides requirements for:

• When loan closings can be scheduled (may be dictated by required disclosures)

• When new Truth in Lending disclosures must be provided to consumers

• Since required wait times after the disclosure are dictated by “business days,” the definition of a “business day”

• When fees (credit checks and appraisals) can be collected from the borrower

This means that consulting with your mortgage professional upfront and throughout the process about the planned closing dates is critical for achieving an on time settlement.

And for starters under these current market conditions, you should plan on at least 30 days to complete the loan process and settlement from initial application.

What can affect the loan timeline and delay settlement? A change in any of the following could impact your Annual Percentage Rate (APR) triggering a mandatory disclosure and associated required “wait period,” and therefore your estimated closing date:

• Change in mortgage product (switching from a commercial to a VA or FHA loan)

• Change in settlement date

• Change in loan amount such as increasing or decreasing the amount of down payment

• Unlocked rate

• Change in fees by third parties – such as your settlement agent

Please note! The interest rate on your loan impacts the APR. This means that until you lock in your rate, an exact APR cannot be determined. This will also trigger a required disclosure and mandatory three business day wait period delay.

What can I do to help keep the process on track ?

• Review the timeline and potential impacts with your mortgage professional upfront
and throughout the loan process so you can keep your REALTOR® or Builder informed. It is wise to plan for at least 30 days to complete the loan process.

• Obtain a credit-checked preapproval before you start to shop for a home.

• Review the initial disclosures you receive, including the Truth in Lending (TIL). The TIL discloses in writing the terms and conditions of a mortgage including the APR and other charges so that you are clear about the details of the transaction before moving any further.

Are there exceptions to the disclosure requirements or can they be waived by the purchaser to keep a settlement on track?
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I’m here to help you work through this process and answer any questions you may have.