How Recent Legislation Effects Realtors® and Homebuyers

HERA (Housing and Economic Recovery Act)
HVCC (Home Valuation Code of Conduct)
HOEPA (Home Ownership and Equity Protection Act)
MDIA (Mortgage Disclosure Improvement Act)

How Recent Legislation Effects Realtors® and Homebuyers
The mortgage industry is undergoing many changes to help provide homebuyers and homeowners better information about home financing. HERA, HOEPA, MDIA & HVCC are federal laws passed recently which mandate many new requirements and are now in effect. We're providing this document to help you understand some of the changes and to help guide you as what could affect the home buying experience.

Following are Key Elements all Realtors and Homeowners Need to Know:

1. If the homebuyer is financing the property, these new regulatory guidelines will impact – and 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 a home purchase transaction can close is 7 business days after the homebuyer is issued their initial mortgage disclosures from the lender.

Annual Percentage Rate (APR) 2. The only fee that can be collected by the lender at application is the credit report fee. The fee for appraisal cannot be collected until 3 days after initial Truth in Lending Disclosure (TIL) is received. Historically, upfront fees could be collected immediately at the time of application.

3. The homebuyer must be provided with a copy of his or her appraisal a minimum of 3 business days prior to closing.
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.

4. An increase of more than .125% in the Annual Percentage Rate (APR) from the initial TIL requires the disclosure to be revised and reissued to the homebuyer. They must receive a revised TIL disclosure at least 7 business days before closing, providing the homebuyer with the time required to determine if they are comfortable with their loan choice. There are a number of things that can impact the homebuyer’s APR (see graph to the left).

How can a REALTOR help ensure timely closings?

1. Set realistic expectations upfront and throughout the transaction with both the buyer and the seller in regards to potential closing dates. It is wise to plan for at least a minimum 30 day close.

2. Discuss these new provisions with your settlement agents to avoid unnecessary delays down the road. It is critical that any third party fees that impact the APR are accurate because many changes will require the lender to re-disclose the TIL – which requires 7 business days before the transaction can close. Provide the settlement agent information to the lender as early in the process as possible.

3. Make sure the buyer understands that the interest rate impacts their APR and that until that rate is locked (which is at their discretion), the initial TIL will not be accurate, so an updated TIL disclosure will likely be needed (resulting in an additional 7 days before the transaction can close. It is wise for the homebuyer to chose a lender to work with as soon as possible once a closing date is set. Getting quotes for loans from multiple lenders will likely result in delay of the closing because of the 7 business day requirement for TIL disclosures each time fees change.