I would like to explain the new HERA and MDIA compliance laws that have taken effect for the mortgage market. Let us look how these laws affect the three main components to a transaction; the buyers, the Realtors, and the settlement agents.
The Buyers:
Time Frame: Buyers should now understand that a 30 day closing will be tougher to accomplish and most contract offers should be written for 45 day closes. PRMI will try to close as quickly as possible, but this helps to set proper timeline expectations.
Locking Your Loan's Interest Rate: Mortgage professionals will now suggest locking you loan as soon as possible, as this will help in keeping the closing timeline firm. Lenders will not be able to disclose the GFE (Good Faith Estimate) and TIL (Truth In Lending) until the loan is locked and all fees finalized. Most lenders prefer that loans are locked no later than 7 days before the closing.
The Realtors:
Managing Realistic Expectations: Sellers and Buyers must now plan for at least a 30 day closing with 45 days being more likely. The 45 day close will probably replace the 30 day as standard. Communication between interested parties will be more crucial than ever.
Settlement Agent Communication: All fees, including the typical $195-$295 realtor administration fees must be communicated on the preliminary HUD. This is pertinent because it controls the APR (Annual Percentage Rate) on the TIL. Also, any third party fees that impact APR must be fully disclosed to the lender and settlement agent as soon as a contract is executed.
The Settlement Agents:
Preliminary HUD's: Prelim HUD's will be key to keeping closing timelines fast. If the lender can properly disclose the total fees and APR of the TIL to the borrower early in the loan process, they may be able to avoid having to wait 6 business days after the final HUD is approved before they can close.
The Reason:
The reason for these changes is due to the MDIA Mortgage Disclosure Improvement Act) that took effect July 30th. This act requires the borrower to have a minimum of 3 business days to review the final GFE and TIL if the TIL's annual percentage rate moves more than .125% from the original loan disclosures. This timeline could be as much as 7 days with some brokers. PRMI is hoping to maintain a 3 day review time as the "timer" starts as soon as evidence the borrower has received the new TIL is reviewed.
For Example, if the new TIL is emailed to a borrower on Monday and the client sends confirmation back the clock will start on Tuesday and be fulfilled on Friday. Saturday is also included as a business day.
We hope this has shed some light on the new laws and guidelines coming to the forefront. We welcome questions from any of these three parties and are happy to educate consumers.
The Buyers:
Time Frame: Buyers should now understand that a 30 day closing will be tougher to accomplish and most contract offers should be written for 45 day closes. PRMI will try to close as quickly as possible, but this helps to set proper timeline expectations.
Locking Your Loan's Interest Rate: Mortgage professionals will now suggest locking you loan as soon as possible, as this will help in keeping the closing timeline firm. Lenders will not be able to disclose the GFE (Good Faith Estimate) and TIL (Truth In Lending) until the loan is locked and all fees finalized. Most lenders prefer that loans are locked no later than 7 days before the closing.
The Realtors:
Managing Realistic Expectations: Sellers and Buyers must now plan for at least a 30 day closing with 45 days being more likely. The 45 day close will probably replace the 30 day as standard. Communication between interested parties will be more crucial than ever.
Settlement Agent Communication: All fees, including the typical $195-$295 realtor administration fees must be communicated on the preliminary HUD. This is pertinent because it controls the APR (Annual Percentage Rate) on the TIL. Also, any third party fees that impact APR must be fully disclosed to the lender and settlement agent as soon as a contract is executed.
The Settlement Agents:
Preliminary HUD's: Prelim HUD's will be key to keeping closing timelines fast. If the lender can properly disclose the total fees and APR of the TIL to the borrower early in the loan process, they may be able to avoid having to wait 6 business days after the final HUD is approved before they can close.
The Reason:
The reason for these changes is due to the MDIA Mortgage Disclosure Improvement Act) that took effect July 30th. This act requires the borrower to have a minimum of 3 business days to review the final GFE and TIL if the TIL's annual percentage rate moves more than .125% from the original loan disclosures. This timeline could be as much as 7 days with some brokers. PRMI is hoping to maintain a 3 day review time as the "timer" starts as soon as evidence the borrower has received the new TIL is reviewed.
For Example, if the new TIL is emailed to a borrower on Monday and the client sends confirmation back the clock will start on Tuesday and be fulfilled on Friday. Saturday is also included as a business day.
We hope this has shed some light on the new laws and guidelines coming to the forefront. We welcome questions from any of these three parties and are happy to educate consumers.