PARAMOUNT MORTGAGE - LENDER'S BLOG

New Government Regulations Become Effective July 30th

Starting July 30, 2009, new regulations affecting mortgage loan transactions become effective. Borrowers must now be presented with cost disclosures much earlier in the mortgage process allowing them to make better and more informed decisions.
 
These new regulations will radically affect the timeline for completing a mortgage transaction. The era of the quick closing is over. Now, regardless of how expeditiously a file can be processed and underwritten, it can not close any earlier than the 7th business day after the initial disclosures have been issued. 
 
Saturdays count in the definition of a "business day", but all Federal holidays and Sundays are excluded. Communication with the borrower may utilize email if a consent document is sent and the borrower acknowledges they can receive, view, print and save all emailed disclosures.
 
The new rules affect both purchases and refinances and apply to primary residences, second homes and investment properties.
 
New Regulations Include:

Upfront fees cannot be collected and processed prior to providing initial mortgage disclosures. Disclosures will be considered received three (3) business days after being sent, whether by email or surface mail.
 
The earliest a borrower can close is seven (7) business days after initial loan disclosures have been issued. Changes have been made in the Truth In Lending Act (TIL) to ensure borrowers will have adequate time to review important loan information. Realtors must carefully consider critical timing issues when completing a sales contract.  
 
Borrowers will receive a copy of their appraisal at least three (3) business days before their closing. On May 1, 2009, this procedure became effective for borrowers with conventional loan applications and their appraisals can be sent via email. Receipt of the appraisal by the borrower does not necessarily mean an underwriter has reviewed the appraisal.
 
APR Changes; If the APR (Annual Percentage Rate) changes during the processing of your mortgage and falls outside of allowed tolerances (0.125% for a fixed rate mortgage, or 0.25% for an adjustable rate mortgage), or if the loan terms and/or fees change, this will automatically trigger the need for a new TIL disclosure. If changes occur at closing, a minimum delay of four (4) days will occur. The new TIL disclosure must be received no less than three (3) business days before closing, or the loan closing cannot proceed. Many factors can contribute to a change in the APR including increases or decreases in the loan amount, fees and closing agent charges just to name a few.

The new rules are a result of several newly enacted laws including, The Home Ownership and Equity Protection Act (HOEPA), the Housing and Economic Recovery Act (HERA), the Mortgage Disclosure Improvement Act, as well as regulations published by the Federal Reserve Board under the Truth in Lending Act (TIL). Fannie Mae and Freddie Mac also implemented the Home Valuation Code of Conduct (HVCC) to ensure accurate property appraisals.
 
These regulatory changes were implemented to protect the consumer by making them more informed and to guard against deceptive lending practices.
Posted by Customer Service on July 24th, 2009 12:50 PMPost a Comment (0)
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