HERA and HVCC - background information

  • 394 views
Uploaded on

In 2008, the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA) were passed by Congress, and the Federal Reserve Board published the regulations under …

In 2008, the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA) were passed by Congress, and the Federal Reserve Board published the regulations under the Truth in Lending Act. These regulations were written to provide a more transparent, level and fair regulation of the real estate industry; to add additional steps to help prevent deceptive lending practices; and to protect consumers by making them more informed -and therefore more confident - in their home financing choices. In addition, Fannie Mae and Freddie Mac adopted the Home valuation Code of Conduct (HVCC) in 2008 to reinforce appraiser independence, valuation protections, and enhance the overall integrity of the valuation process by promoting the accuracy of appraisals by shielding appraisers from undue influence.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
394
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
0
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. PRIVATE MORTGAGE BANKING How the New Government Regulations May Impact Your Closing Dates The mortgage industry is certainly undergoing many changes to help provide homebuyers better information when it comes to financing a home. We're providing this document to help you understand some of the new regulations and investor requirements that are taking effect - especially those that impact timelines. Wells Fargo Home Mortgage is dedicated to working with our industry colleagues to help ensure these changes do not detract from an outstanding experience for our mutual customers. HERA and HVCC - background information In 2008, the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA)were passed by Congress, and the Federal Reserve Board published the regulations under theTruth in Lending Act.These regulations were written to provide a more transparent, level and fair regulation of the real estate industry; to add additional steps to help prevent deceptive lending practices; and to protect consumers by making them more informed -and therefore more confident - in their home financing choices. In addition, Fannie Mae and Freddie Mac adopted the Homevaluation Code of Conduct (HVCC) in 2008 to reinforce appraiser independence, valuation protections, and enhance the overall integrity of the valuation process. Promotes the accuracy of appraisals by shielding appraisers from undue influence, Effective and ensuring that borrowers have sufficient notice of appraisal content by requiring May 1,2009 HVCC: that borrowers receive a copy of their appraisal reports no less than three days prior to the closing of their loan absent a borrower waiver of this requirement. Amends theTruth in Lending Act (TIL), implemented through Regulation Z. Has a E,%ctlve number of provisions including the Mortgage Disclosure Improvement Act, which July.30,200!? - - p - ~ ' r ? r! : changes theTruth in Lending Act requirements surrounding early and final disclosures to homebuyers and addresses the timing of when fees can be charged.
  • 2. Four key elements you need to know n If the homebuyer is financing t h e property, these new regulatory and investor guidelines will impact -a n d could even dictate -the closing date. Historically, homebuyers and sellers would agree on a closing date, and then service providers - including lenders -would work as best they could toward meeting that date. Going forward, purchase contracts can still be written with a specific closing date in mind, but all parties need to take into account that the earliest any home purchase transaction can close is 7 business davs after the homebuyer is issued his or her initial mortgage disclosures from the lender. If the application is taken by phone -and everything went perfectly, the earliest closing date would be 7 business days after application. (Note: At Wells Fargo Home Mortgage, Saturdays, with the exception of federal holidays, do count as a business day for the purpose of disclosures only.) F= Upfront fees cannot b e collected b y the lender (except for a credit report fee) until t h e initial disclosures are received. I f t h e disclosures are overnighted, they are considered "received" the next business day - allowing t h e fees t o b e Go to page 3 to see how these collected o n t h e following business day. elements play out in a calendar. Historically, upfront fees could be collected immediately. Starting July 30,2009, upfront fees can be collected immediately when the application is taken in person and the homebuyer receives his or her initial disclosures.The only exception is the credit report fee which can be collected at application. The homebuyer must b e provided w i t h a copy o f his or her appraisal a minimum o f 3 business days prior t o closing. To help expedite the process, Wells Fargo Home Mortgage has elected to have a copy of the appraisal issued directly t o the homebuyer - and the homebuyer must receive the appraisal at least 3 business days prior to the mortgage closing.This means the homebuyer may receive his or her appraisal before or simultaneous to the lender receiving their copy. If the homebuyer believes the 3-business-day required review period is not necessary for whatever reason, he or she has the right to waive that requirement. R An increase of more than .I 25% in t h e Annual Percentage Rate (APR) f r o m t h e initial Truth in Lending Disclosure (TIL) requires theTIL disclosure t o b e revised and reissued t o t h e homebuyer.The homebuyer must receive a revised TIL disclosure a t least 3 business days before closing, providing the Unlocked rate homebuyer w i t h t h e time required t o determine if t h e homebuyer is Change in loan amount comfortable w i t h his or her loan choice. If mailed, theTIL disclosure is considered "received 3 business days after mailing. Product change A more typical contract date may be 30-45 days -or possibly longer (such as with a Rate re-lock due t o market new construction loan). Considering that many things occur and may be changed or improvement finalized throughout the course of the transaction, there are a number of things that Change in closing date can impact the homebuyer's APR.Therefore it is critical on the front end to ensure Changes to fees, inclusive that estimated fees are as accurate as possible. of settlement agent fees
  • 3. The new mortgage process and timeline Perhaps the easiest way to Other assumptions i n the illustration below: understand the new process and The homebuyer applies on the first of the month. timelines required by these The application is taken over the phone. regulations for a primary residence The homebuyer locks in the interest rate at least 10 business days prior to the or second home purchase desired close date of July 30. transaction is with a calendar. Since most transactions are not "rush" A home equity loan was not added to the transaction (doing so would require the same disclosure timelines to start for the home equity loan). deals - but rather close in a 30-60 day timeframe, the calendar below The estimated fees increased the APR more than .I 25% requiring a re-disclosure illustrates a desired 30-day close. It is of theTIL which Wells Fargo Home Mortgage calls the PreClosingTIL. (The revised wise to plan for at least a 30-day APR was final.) close. The appraisal was ordered and came in at or above value, and the homebuyer received his or her copy at least 3 business days prior to the desired close date of July 30. The homebuyer signs and closes on July 30 (the last day of the required final disclosure review period). If the application is taken in person (instead of a phone application in the example below), then we may be ready to close up t o 4 business days sooner because the initial disclosures are issued and the upfront fees can be collected at application. Note: Saturdays are considered a business day only for the purposes ofdisclosures, unless they are a Federalholiday. June 30 July 3 3 4 Homebuyerfinalizes Homebuyer makes phone Federal holiday contract of sale on a application with WFHM residential property lnitial disclosures Day 2 Wh initial aclosures Initial discosures printed Day and overnightedto WFHM 5 6 7 8 9 10 Initial disclosures Day 3 Initial disclosures Day 4 Initial disclosures Day 5 Initial disclosures Day 6 lnitial disclosures Day 7 Overnight mail recieved by Earliest date lo close if customer A. i .. collcci ~rpirorit - LII~IPSS iees appraisal is riot required. , applitatio~i5 taken i~; ihc !a .! person - -- Assumedesiredclosedate is Appraisal must becompleted July 30: and mailedtothe homebuyer 7 business days prior Ideally rate locked at least 10 business days priorto PreClostngTlLmust be TILMall Day 1 PreClos~ng PreCloslngIILMall Day 2 close malled APR is final Appraisal Minimum Day 1 . .., isal Minimum Day 2 AppraisalMinimum Day 3 PreClosingTlLMail Day 3; PreclosingTI1Homebuyer PreClosingTIL Homebuyer PreClosingTI1Homebuyer PreClosingTlL received ~~~i~~ D~~ 1 Review Day 2
  • 4. Working together to ensure timely closings - everyone plays a key role Obtain a credit-checked Set realistic expectations Help homebuyers Make sure any third party preapproval before you start upfront and throughout the understand timelines and fees that impact the A R are P to shop for a home. transaction with the listing anything that can impact accurate - understanding (Applying in person may help agent, the seller and the their closing date. It is wise to any change to fees that expedite the process.) homebuyer in regards to encourage homebuyers, impact the A R could lead to P - potential impacts with your Review the timeline and potential closing dates. It is wise to plan for at least a REALTORS', and Builders to plan for at least a 30-day a required re-disclosure of theTIL (if they collectively 30-dav close. close. increase the A R more than P Private Mortgage Banker so you can keep your REALTORB or Builder informed. It is wise - with your settlement agents Discuss these new provisions Take applications and help homebuyers understand .125%).The re-disclosure requires the homebuyer be given an additional 3- to plan for at least a 30-day immediatelyto avoid their product options. business-day review period close. unnecessary delays down prior to closing, after receipt. Issue homebuyers their initial the road. It is critical that any In the initial disclosure disclosures, Work proactively on third party fees that impact packet you receive, the providing a preliminary HUD the A R are accurate because P Collect fees. (Note: unless the impacts of the new any change of fees that initial disclosures are handed with accurate fees to lenders regulations and investor increases the A R more than P to the homebuyer the same at least 10 business days requirements are outlined. .125% will require the lender day as you take his or her before closing.This will Make sure to pose any to re-disclose theTIL - application, fees cannot be enable lenders to issue the questions to your Private allowing 7 business days collected until 4 business TIL 7 business days prior to Mortgage Banker. the scheduled closing date. before the transaction can days after the homebuyer Know that these new close.This allows 3 business has been issued his or her This allows 3 business days regulations and investor days for mailing and provides initial TIL). for mailing and provides the requirements are in place to the homebuyers with the homebuyers with the time Ensure the loan is locked at ensure you have time to time required to determine if least businessdays prior required to determine if they consider your loan choice are with to the desiredclose date. are comfortable with their and feel confident to move their loan choice. loan choice. forward. If the A R increases more P Providethe settlement agent than .125% then the lender Review the appraisal delivery information to the lender as must re-disclose theTlL 7 disclosure and determine early in the process as business days before the whether or not you wish to possible. transaction can close.This waive the 3-business-day Make sure the homebuyers allows 3 business days for review period prior to understand that their mailing and provides the closing. interest rate impacts their homebuyers with the time Understand that the interest APR and that until that rate is required to determine if they rate on your loan impacts the locked (which is at their are comfortable with their APR.This means that until discretion), the initial TIL will loan choice. you lock in your rate, an not be accurate, so a exact A R cannot be P PreclosingTIL disclosure will determined. Minimally plan likely be needed. on locking at least 10 business days prior to the date you wish to close. Understand that a change in mortgage product could impact your APR and therefore your estimated closing date. :s cobock finthe rste and %as as S O O ~ Understand that changes in fees by third parties such as your settlement agent could also impact your closing date. REALTOR is a registered mark of the NATIONAL ASSOCIATION of REALTORS*. Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. O 2009 Wells Fargo Bank, N.A.AII rights reserved. S 105175 6/09 ;I{LU
  • 5. Frequently asked questions 1 How d o these new requirements impact applications . 7. Can t h e credit report fees b e collected at t h e time o f taken prior t o their effective dates? applications? For HVCC, applications with an identified property prior to Yes.The credit report fee is the only fee that can be collected May 1,2009 are not impacted. at application. For HERA, applications with an identified property prior to July 30,2009 are not impacted. 8. When a phone application is taken, can a post-dated check, credit card or other payment information be collected and held until upfront fee payment is allowed? 2. D o the timing requirements for t h e issuance o f the initial disclosure and re-disclosure, and fee collection No. Fees or payment information can not be collected prior to apply t o investment properties? the allowed upfront fee collection date which is the next business day after the initial disclosures are received. If this is No.These requirements only apply to primary residence and an in-person application, issuance of disclosures and second home transactions. collection of upfront fees may happen on the same day. 3. The final TIL must b e received 3 business days prior t o 9. Can fees b e collected a t an in-person application? closing. Is that 3 full days? Remember, we must allow 3 business days for mailing, then During an in-person application, fees may be collected after the homebuyer is provided his or her initial disclosures (TIL) the homebuyers have the 3-business-day review period and required signatures are received. required to determine if they are comfortable with their loan choice. Closing can occur on the third business day after receipt. 10. How d o you know if the initial APR has t o b e re-disclosed? 4. What if t h e homebuyer adds a home equity loan o r line An APR increase of more than .I 25% from the initial TIL o f credit after the initial application? How are disclosures requires the lender to update and re-issue - and the impacted? homebuyer to receive - the new and final A R via theTruth P Home equity loan:The initial disclosure period starts over in Lending (TIL) disclosure (referred to by Wells Fargo Home and all disclosures must be issued for the home equity loan. Mortgage as the PreclosingTIL) a minimum of 3 business days Home equity line o f credit:There is no impact. prior t o the close date. If the change is less than .I 25%, then no re-disclosure is required. 5. What if t h e homebuyer is delayed in paying his or her 11. For t h e purpose o f these new disclosure timelines, upfront fees? what is considered a business day? Which holidays will n o t If the upfront fees are not provided by the homebuyer in a b e included as business days? timely manner, this will likely impact the lender's ability to order certain vendor services (e.g., the appraisal) and move At Wells Fargo Home Mortgage, all weekdays and Saturdays forward with processing the loan until the upfront fees are are considered a business day unless it is a Federal holiday. received.This could affect our ability to provide the best level Federal holidays include: New Year's Day, Memorial Day, of service and to meet the desired closing date. Independence Day, Labor Day, Veteran's Day, Thanksgiving Day, and Christmas Day. 6. Can last minutelrush deals still be accommodated? 12. Let's say there are t w o homebuyers applying for a The new regulations and investor guidelines definitely loan, however, only one is present at t h e in-person redefine"rush.IfThe minimum number of days to close a application. In this scenario, would t h e Private Mortgage transaction is 7 business days after application (or 7 business Banker b e allowed t o collect upfront fees a t t h e time o f days after the initial disclosures are issued). Remember, application from the homebuyer who is present? however, this would be a best-case scenario. If the A RP increases by more than .125%, a PreclosingTIL will be Fees cannot be collected until both parties have received the required and will add an additional 7 business days to the initial disclosures. If the in-person applicant is provided with timing.This allows 3 business days for mailing and provides two copies at application, receipt of disclosures by the second the homebuyers with the time required to determine if they party will need to be verified prior to collecting fees. are comfortable with their loan choice. It is wise to plan on a minimum of 30 days t o close.
  • 6. 13. How does t h e new fee collection regulation impact Builder Best* and Builder Best Expanded Options loans? Builder Best locks allow for rate locks prior to fee collection. If the disclosures are overnighted, they are considered "receivednthe next business day, allowing the fees to be collected the following business day. Remember the Private Mortgage Banker is required to collect the Builder Best feeldeposit within 35 days of the lock period. 14. Fees may n o t b e collected from t h e homebuyer until t h e next business day after t h e initial disclosures are received (unless a n in-person application was taken). Can seller-paid fees b e collected before that time? For example, it is common in some areas that t h e seller pays the appraisal fee. No, the homebuyer on the application must have received the initial disclosures before the seller can pay the appraisal fee on their behalf. 15. Can theTIL re-disclosure b e sent within the 7-business-day period from when t h e initial disclosures are issued? Yes, the required re-disclosure of the PreclosingTIL can be sent within the first 7-business-day period. 16. Can t h e loan b e locked a t the time o f application i f fees have n o t been collected yet? Yes. 17. Do these regulations and investor requirements only impact purchase transactions o r are refinances subject t o these same guidelines? Both purchase and refinance transactions are impacted. 18. Is t h e 3-business-day right o f rescission still in effect? Yes, the right of rescission is still in effect for refinance transactions.The loan can close 7 business days after anyTlL re-disclosureis issued, then the right-of-rescission period begins. The loan can fund after the rescission period expires.