New Government Regulations for Loan Disclosures

Recent Federal legislation will impact how quickly loans can now be closed. When completing your purchase agreement, even if you are prepared to move forward and close quickly, a more conservative timeframe of 30-45 days from the time of the contract acceptance might be a more realistic expectation.

HERA (Housing & Economic Recovery Act) was designed to ensure that the borrower(s) involved in the transaction are given accurate disclosure information regarding the loan they are applying for and adequate time to re-evaluate their decision to proceed in the event of any changes that would impact their costs to finance.

Under HERA:

No fees may be collected for the transaction other than those for running a credit report at the initial time of application. Additional fees (such as appraisal fees) may be collected only after four business days.

Should the APR change by more than .125% on a fixed rate loan or .25% on an ARM, the lender must disclose the new APR and the borrower must have a minimum of 3 business days to review the information before the transaction may proceed.

Items that can trigger re-disclosure requirements include changes to the loan amount, closing date, loan program, or any fees that impact the APR or interest rate.

In cases where re-disclosures documents are sent by mail to the borrower, anticipate six business days (three to allow for mailing and three to allow adequate time to review them) before a closing can occur.

These new regulations go into effect on July 30th so it is important to plan accordingly to ensure smooth and timely closings.