Danny Salas

Why You Can’t Close A Loan In Six Days Anymore

HERA

The Housing and Economic Recovery Act went into effect in 2008.  It was a direct result of the Financial Crash that led to the Mortgage Credit Crisis and an economic recession not seen in seventy years.  The global effects of the crisis were a first, and the following article will help to explain the changes that have occurred since, and will continue to occur in the foreseeable future.

HERA Amends TILA

One of the purposes of HERA was to amend the Truth-In-Lending Act regarding disclosure.  It was important for Congress to feel as though the consumer had time to soak-it-all-in, so to speak.  There needed to be assurances that the consumer received the information, had time to understand it, and then proceed with the application process of completing a new mortgage.

HVCC

The first major change I’ll discuss is the Home Valuation Code of Conduct.  This went into law on May 1, 2009, and into effect on the following Monday, May 4, 2009.  A previous article discusses the Code’s procedures, however, let’s discuss the effects on disclosure.  Bear in mind that these procedures have to do with Conventional Financning.  FHA still allows for the appraiser to be contacted by me, have the appraisal ordered directly through me, and I can discuss specifics of the property, with the appraiser.

AMC’s

Appraisal Management Companies will have to do the ordering for appraisals.  Different lenders use different AMC’s, and they each operate differently.  To see how it works, link in to the above mentioned article.  One of the biggest concerns, however, is that appraisers are being paid a fraction of what they were, just a year ago.  The AMC’s are keeping the bulk of the appraisal fee.  What if you went through a management company for a dentist, when you had a toothache?  Let’s say the dental management company kept 60% of the fee for themselves.  How comfortable would you feel going to that dentist?  Then, what if there was a persisting ache and you needed something corrected?  But, the dentist wouldn’t get any compensation for the correction.  You starting to feel some of the concerns?  Think you might start sweating at this point?

Wrong Doctor?

On that same note, what if you went to the managment company and they sent you to a proctologist?  Just like some appraisers…they might not know the area too well…and guess what…they’re barking up the wrong tree.  AMC’s don’t pay too much attention to where they’re ordering their appraisals from.  So, many times, we’re getting appraisers from Yuba City that don’t really know Forest Ranch Values.  Unfair!

HVCC and Delivery

One of the main reasons a loan may not close, legally, for seven days is that a borrower MUST HAVE THE APPRAISAL delivered to them for three business days before they sign their loan documents.  There is a waiver that they could sign, however, getting clients to waive their rights by signing a waiver isn’t always the most comfortable thing to do.  There are four methods of delivery:

Appraisal Delivery Method	Days Before Signing
Face – To – Face	Date + Three (3) Business Days
Via E-Mail	Confirmation + Three (3) Business Days
U.S. Mail	Date + Five (5) Business Days
Borrower Signed Waiver	Zero (0) Days

MDIA

The Mortgage Disclosure Information Act was finalized on May 8, 2009.  This Act effects all loans with applications taken on, or after, July 30, 2009.  There are four areas of concern regarding MDIA:

Up front fee collection

Initial Disclosure Review

APR changes

“No Requirement to Complete” Statement

Why Access Became A Bank

MDIA is a MUST KNOW, if you’re in the industry.  It effects when an escrow can legally close. It’s interesting to note, also, that it effects Bankers and Brokers differently.  And that’s EXACTLY WHY Access became a Bank in 2004.  We saw the writing on the wall.  However, it does make sense for us to keep our Broker’s License too, because that makes us a “Culture of Choice.”  Sometimes, we may NEED to broker a loan, to get the best deal for a client.  Sometimes, it will make more sence for us to fund that loan ourselves, and keep it at our bank.  Again, giving our clients and Reators the choices that they need in an ever-changing industry like ours.

We are one of the strongest and largest retail branching

and banking companies in the Western United States

Up Front Fee Collection (Broker)

No imposing of fees, other than a bona fide credit report fee can be charged prior to the Initial TIL disclosure being provided.

E-mail Required Wait Time	U.S. Mail Required Wait Time
1 business day after borrower downloads initial disclosures FROM LENDER	4 business days after initial disclosures are mailed FROM LENDER

Understanding the urgency to get the file to the lender, as soon as possible, so that they may disclose fees, enabling the broker to collect funds and order an appraisal promptly, is imperative.

Up Front Fee Collection (Bank)

Face-To-Face	E-mail Required Wait Time	U.S. Mail Required Wait Time
Immediate Fund Collection	1 business day after borrower downloads initial disclosures FROM DANNY	4 business days after initial disclosures are mailed FROM DANNY

So, it would make more sence, for me to meet with a client, face-to-face, take his or her application, and keep the loan with my Bank.  I just saved four days of waiting.  

Initial Disclosure Review (Broker)

There must be a 7 day waiting period between the date the initial TIL disclosure is provided to the consumer and closing / signing of the loan!

E-mail Required Wait Time	U.S. Mail Required Wait Time
7 business day after borrower downloads initial disclosures FROM LENDER	7 business days after initial disclosures are mailed FROM LENDER

Initial Disclosure Review (Bank)

E-mail Required Wait Time	U.S. Mail Required Wait Time
7 business day after borrower downloads initial disclosures FROM DANNY	7 business days after initial disclosures are mailed FROM DANNY

As you can see, there must be time for a consumer to absorb the information presented to them, before your can fund a loan.

APR Changes

The Annual Percentage Rate will change when there is a change in the cost of the loan.  There must be a 3 day waiting period between the date a final, redisclosed Truth-In-Lending (TIL) is received by the consumer and the closing / signing of the loan.

Potential Impacts to APR

Unlocked interest rate

Change in loan amount

Product change

Change in closing date

Changes to fees, inclusive of settlement agents’ fees (i.e. an  accomodation notary signing of the loan papers).

APR change of .125% from a previously disclosed APR.

	E-mail Required Wait Time	U.S. Mail Required Wait Time
APR change of .125% plus TIL re-issue	3 business days after borrower downloads re-disclosures	6 business days after re-disclosures are mailed

So, to break this down…any of the above items can change the APR.  If it does so, by .125% in ANY direction…up or down…the lending institution must re-disclose the cost of the loan to the borrower.  The borrower must have time to aborb these changes before they can sign their final loan papers.  The method of disclosure, in the table above, determines the amount of wait time.

No Requirement to Complete Statement

The final, re-disclosed, and initial TIL disclosures shall contain the following statement:

“You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

We are Banker’s who can Broker!

Access Real Estate Lending…

Your “Culture of Choice.”

This entry was posted on Thursday, August 20th, 2009 at 4:13 am and is filed under Chico Home Loans, Home Buying, Mortgage Industry Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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