The Veridian Blog

How will the HERA Mortgage Disclosure Improvement Act impact your closings?

The Housing and Economic Recovery Act (“HERA”) includes wording, namely the Mortgage Disclosure Improvement Act that applies to applications taken by lenders or brokers on or after May 1, 2009.   requires that lenders disclose after certain waiting periods.  Here are some notable guidelines that may impact a loan transaction timeline:

1.      Upfront fees cannot be charged until the borrower receives the initial Truth-in-Lending (“TIL”) from the lender.  Veridian has never charged upfront fees anyway, so we aren’t impacted by this particular guideline.

2.      Initial TIL now required on all purchases and refinances of primary residences and second homes.  This means another paper to sign at the outset – no big deal.

3.      Appraisal requests can only be made 4 days after initial disclosures are mailed out to the borrowers.  This is a significant one because of the mandatory waiting period.  In a quick close, this can be an excruciating delay, but is somewhat mitigated by the fact that the loan should be initially underwritten during this time anyway. 

4.      Lenders are required to RE-disclose APR (on the Truth-in-Lending statement) if the initial APR is over-disclosed by more than 1/8%.  Moreover, there is a 7 business day waiting period during this re-disclosure period which could obviously cause delays in the signing/closing date.  This is huge and puts pressure on the lender/broker to get it right (or make a conservative estimate) at the beginning.

5.      Brokers will need to provide an initial HUD-1 before closing documents are released.  Many lenders were already requiring this as a prior-to-doc condition.

6.      The final TIL must be received 3 business days prior to closing.

Business days here include Saturday.  HERA only applies to primary residence and second home transactions (not investment home transactions).

For more details, information and reasons for HERA, just call us!