HERA - How it can affect your closing.

Another new item on the consumer protection front: HERA or the Home and Economic Recovery Act. The basic aim of this act is to make sure the borrowers are kept in the loop with regards to the mortgage transaction and really just forces better lending practices. The act came into effect at the end of July and many lenders have already put automatic solutions in place to insure they're operating within the new guidelines. There are four basic guidelines, below you'll find a brief outline of each.

1. The closing date is now heavily influenced and often decided by the lender.
   ▪▪▪ Up until now, everyone worked together to meet an agreed upon closing date. But now, a closing date can still be decided and even included in the contract, but the earliest any purchase can close is 7 days after the borrower receives the initial mortgage disclosures from the lender institution.
2. The lender cannot collect any up-front fees with the exception of the credit report fee.
   ▪▪▪ The borrower now has to physically receive the initial disclosures before any fees can be collected. Any overnight shipping of documents constitutes reception the next business day, with the exception of Saturday. Many brokers were requesting credit card information for appraisals but this is not allowed until the disclosures have been received. Unless the lender and the borrower are face to face when the application is taken and the disclosures are provided, no fees can be collected.
3. The borrower must receive a copy of their appraisal no less than three (3) days before closing.
   ▪▪▪ The borrower does have an opportunity to waive this if they feel it's not necessary
4. Lastly - The APR caveat. Any increase in the APR more than 1/8th% or .125% from the original TIL (Truth in Lending disclosure) requires that the lender provide an updated TIL to the borrower along with a revision period.
   ▪▪▪ The borrower must receive an updated TIL no less than three (3) days before closing. If the lender mails the disclosure, after three days, it's considered received. This is the heavy hitter for most mortgage professionals. Many figures during the transaction may change while the process is underway. The APR will be affected by changes in the loan amount, an altered closing date, a re-lock because of rate improvements, etc. This will force lenders to keep a sharp eye on the accuracy of all fees related to the transaction. Some folks say this is the part of the HERA that will eliminate the 30 day lock; indeed it has put a definite strain on the time-frame, but will ultimately force better practices across the industry.

DNJ Mortgage

1350 Sunday Drive

Raleigh, NC 27607

919.459.6560

http://www.integritylender.com