How new government regulations can impact your closing
Recently there have been a number of significant changes to federal laws, regulations and statutes as well as new legislation regarding the lending and real estate industries and real estate transactions. Each change affects homebuyers and sellers, but they all aim to standardize or further regulate the real estate and lending industries in order to further increase transparency and improve the real estate transaction experience for consumers. The effects of new regulations on your closing date Two pieces of legislation enacted by the federal government are the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA). The Federal Reserve Board published the regulations for complying with HOEPA and HERA in the Truth in Lending Act. Both HOEPA and HERA will affect the timing of real estate transactions. For example, one particular HERA provision, the Mortgage Disclosure Improvement Act, changes requirements for early and final disclosures to homebuyers, and affects when fees can be charged. Also in 2008, Fannie Mae ® and Freddie Mac ® adopted the Home Valuation Code of Conduct (HVCC), which promotes the accuracy of appraisals by shielding appraisers from undue influence and ensures borrowers have sufficient notice of appraisal content by requiring that borrowers receive a copy of their appraisal reports no less than three days prior to the closing of their loan unless the borrower waives this requirement. The HVCC will not be implemented on Federal Housing Administration (FHA) loans. How the timing of closings may be affected? For homebuyers financing the purchase through a lender, these new guidelines can greatly impact closing dates – possibly even dictating the timing.
Prior to these new regulations, homebuyers and sellers would agree to a date and were only limited by the speed with which their service providers could get everything done. Now, the earliest any home purchase transaction can close is seven business days after the initial mortgage disclosures are received by the borrower. (NOTE: With the exception of federal holidays, Saturdays count as a business day for the purpose of disclosures.)* Initial disclosures must now be received by the borrower before upfront fees can be collected by the lender. Historically, upfront fees could be collected immediately at the time of application for both in-person and phone applications. Moving forward, the homebuyer must receive their initial disclosures before upfront fees can be collected. The only exception is the credit report fee, which may be collected at application. This adds more time to the overall process. If the disclosures are overnighted, they are considered “received” the next business day (excluding Saturdays) – allowing the fees to be collected on the following business day.
*Truth in Lending Act – Regulation Z.
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Aegis Land Title Group
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