Closing Timelines and 2009 Federal Regulations

This was sent and reprinted with permission from KCRARnews.com

As aRealtor, are you keeping yourself apprised?

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

New Truth in Lending disclosure requirements take effect July 30, 2009 and the timing of your closings may be impacted. With the new 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.

As of July 30, lenders will be 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.

Help your homebuyers understand that their interest rate impacts their APR. Until that rate is locked with their lender, which is at the buyer’s discretion, the initial Truth in Lending Disclosure (TIL) will not be accurate, so a PreClosing TIL will likely be needed. It’s recommended that buyers should minimally plan on locking at least 10 business days prior to the date they wish to close.

For more information, go to http://www.fdic.gov/news/news/financial/2009/fil09026.html.

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.

NAR’s intent is to work toward an immediate 18 month moratorium on HVCC.

Here is a NAR Government Affairs Information Pack on the issue.

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