125% Loans – New Truth In Lending Act – New HVCC Law
What’s Going On In Today’s Mortgage Market Place?
125% Loans! Fannie Mae just recently announced that they will underwrite loans to 125% loan to value under the Making Home Affordable Program. It was increased to 125% from 110% loan to value.
What does this mean for you as a home owner?
If your mortgage loan is owned or backed by Fannie Mae, you could qualify to refinance your mortgage loan at today’s great rates even if you owe more than your home is worth.
How do I know if I qualify?
The first step is to find out of Fannie Mae owns your loan. You can get this information directly from your current mortgage servicer, the company who sends your monthly statement to you. You can also go directly to Fannie Mae’s website at http://loanlookup.fanniemae.com/loanlookup/ to check.
What do I do if Fannie Mae owns my mortgage loan?
If you know a loan officer you trust, call them, they will know exactly what to do. If you do not have or know a loan officer that you trust, please check with your current servicer, get a referral from a friend, family member or co worker. You can also contact me and I will be happy to assist you with a refinance of your current mortgage.
Truth In Lending! The Mortgage Disclosure Improvement Act (MDIA) changes the Truth In Lending Act requirements surrounding early and final disclosure to the borrower and addresses when upfront fees may be collected such as the appraisal fee (now required at the time of order per the HVCC law, see HVCC law below).
How does this affect the borrower?
This new law requires that you receive your loan application and disclosures at a minimum of 4 days prior to ordering your appraisal. Once the documents have been sent to you there is a 3 day waiting period for your review of the documents, specifically the Truth In Lending disclosure, before the lender can collect any fees for your loan. This presents the issue of not being able to order your appraisal until that 3 day period has elapsed since the new HVCC law now requires payment at the time of order for the appraisal. Although 3 days may not seem like much time, when trying to close a loan within 2 or 3 weeks it makes a big difference.
Is waiting on the 3 day period to order the appraisal the only affect on me as the borrower?
No, the MDIA law also requires re-disclosure by the lender if your APR (annual percentage rate) changes by more than .125% of what was originally disclosed. If that happens, you will receive a new set of disclosures and another 3 day wait begins, this is extremely important because if this happens right before your closing date, you will not be able to close until that 3 day period has elapsed.
Does the MDIA law apply to brokers, direct lenders or both?
It applies to both.
What are the potential items that could affect my APR?
- Unlocked Rate
- Change in the loan amount
- Product Change
- Rate re-lock due to market improvement
- Change in closing date
- Changes to fees, inclusive of settlement agent fees
HVCC Law! Promotes the accuracy of appraisals by protecting appraisers from undue influence, and ensuring borrowers have sufficient notice of the appraisal report content by requiring that borrowers receive a copy of their appraisal reports no less than three days prior to their loan closing, absent a borrower-waiver of this requirement. HVCC applies to conventional loans only. It requires that the lender order the appraisal through a third party company, contact between the appraiser and the loan officer or lender has been eliminated.
What does this law have to do with my loan?
If you are doing a conventional loan, you will deal directly with the appraiser vs. your loan officer. The appraiser will no longer be chosen by your or your loan officer but by a third party company that has a list of appraisers that have supplied the proper credentials as a certified appraiser for that state.
What if I don’t agree with the value of my home given in the appraisal?
You can ask your loan officer to dispute the value or specifics of the appraisal with the third party company who will relay the dispute to the appraiser and ask that the appraiser address it. You may also wish to contact the appraiser directly, although your loan officer is prohibited from doing this.
Do I still have to pay for the appraisal if I don’t agree with the value or end up doing a mortgage loan?
Yes, the fee is now collected upfront per the HVCC law.
What if I change lenders because I got a better rate, can I still use the appraisal already done?
No, right now the HVCC law does not account for switching the appraisal from one lender to another. You would have to order and pay for a new appraisal through that lender.
What if I don’t agree with this new HVCC law or I would like to read more about it?
You can go to the following website and read the regulations, the pro’s and con’s of it and sign a petition to have the law amended. www.hvccpetition.com
All of the new laws and regulations being implemented are designed to protect the consumer and are required for both direct lenders and mortgage brokers. Some of the new laws may seem like they are not protecting you but prohibiting your choices, which some do, but for right now it seems like they are necessary to weed out the “not so moral” lenders and loan officers.
We have a bunch of new changes coming in January of 2010 as well. Please stay tuned for what those are in next months article!
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