New Changes In Our Industry
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New Changes to RESPA may affect closing dates
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New Changes In Our Industry
- 1. Change in Our Industry RESPA Reform, Mortgage Disclosure Improvement Act and Truth in Lending
- 11. 8/4 Borrower “A” Meets with GSM 8/3 Borrower “A” Rush Closing 8/12 Borrow “A” Closing/ Settlement 8/27 Closing date for Borrower “B” 8/25 Borrower “B” requests lower loan amt. Wait 3 business days 8/28 Borrower “B” New Closing date August 2009
Editor's Notes
- GSM to present this slide HERA stands for Housing and Economic Recovery Act MDIA is the Mortgage Disclosure Improvement Act Passed in July 2008, effective 7/30/09 It not only impacts how we do business, it impacts our industry. It is a shift in our business culture. All lenders are required to comply. This is a federal requirement so no one is exempt. Excluded are lines of credit (HELOCs)
- These changes provide a more level and fair regulation of our industry. With this regulation also comes consistent practices among all lenders and a level playing field. In addition, it provides controls to help protect consumers from lenders who employ practices that are deceptive. In the end, consumers will be better informed about the process, and more confident about their ability to make smart, informed choices.
- Because of the inability to collect fees right away on non face-to-face applications, the appraisal cannot be ordered immediately. This may have an impact on deals with tight closing dates. As you’ll see in a minute, the regulations can also affect the closing dates in other ways …
- The 7-day waiting period allows the borrower time to review disclosures prior to closing/sign date. It is like a cooling off period. This is the earliest closing date per regulation. “ Provided” is defined as delivering or placing in the mail – not when consumer receives disclosures. (Some parts of the regulations mandate waiting periods after the consumer receives the disclosures; it’s important to pay attention to the specific wording.)
- If the APR increases by more than 0.125% after the initial TIL has been sent, one of the following must occur: Operations can work with the GSM to bring the loan back into APR tolerance OR A new TIL must be sent to the borrower, and the closing can’t occur until three business days after the borrower receives the new disclosures. During the time between contract and closing, many factors can occur that could conceivably affect the APR on the buyer’s loan. This means it is crucial that on the front end, the fees be estimated as accurately as possible (need for inspections, etc.) The APR threshold is being compared to the most recent TIL disclosure that was sent.
- The loan amount could change; for example, due to: Change in amount of available assets Appraised value Borrower qualification The loan program changes – At the borrower’s request Due to borrower or property qualification
- Today, we establish our closing dates on things like borrower request and contract dates. In the future we will need to also consider our earliest closing date as allowed by regulation. This means that we will need to allow time for the initial disclosures on rush files.