Changes to the Mortgage Loan Business Continue to Affect Buyers and Realtors

There have been lots of changes to the mortgage loan business in the last year. The latest to affect the real estate purchase process are the changes to Regulation Z, which take effect July 30, 2009.

The specific changes relate to the timing of collecting up-front fees, wait periods after receipt of disclosures and before consummation, and redisclsure before closing if the APR increases beyond the tolerance.

Fees

• Fees such as appraisal fee and credit report fee cannot be collected until after the early disclosures (Good Faith Estimate & Truth in Lending) are received by the consumer.

Wait Period

• There is a 7-business-day wait period between the delivery of early disclosures and the signing of the closing documents
• Rush closings are not possible

Redisclosure

• If the interest rate or fees included in the APR increase more than .125% (0ne-eighth of a percent!), then the Truth in Lending must be redisclosed. This means the lender must compare the original Truth in Lending APR with the final HUD APR. If the numbers are within 1/8 % of each other, everything is fine. If not, the new APR must be redisclosed.
• A decrease in the APR does not require redisclosure
• The buyer must receive the redisclosed Truth in Lending at least 3 business days prior to loan closing

What does this mean to Realtors? We need to make sure the original Good Faith Estimate is as accurate as possible, since the closing costs charged are a part of the final APR (Annual Percentage Rate). It is crucial that the Good Faith Estimate be correct up front so that the closing costs on the HUD will either match the Good Faith Estimate or be lower.

Thanks to Trey Baker and Bank of America for providing this information during our sales meeting on July 21, 2009.