Confessions of a Contract Processor: HERA leaving you Dazed and Confused?
Mary’s True Confessions:
This morning I woke up with the sole intention of wrapping my mind around the new HERA/RegZ requirements that go into effect this Thursday, July 30th (better late than never right!). I dedicated time to absorb multiple lenders interpretations and their plans for implementation of this process by reading their powerpoint presentations, bulletins and tutorials… all which left me a bit Dazed And Confused!
It appears that each lender has a different interpretation of the law which seems par for the course. The most daunting part of the process is determining how each lender will view the law when determining a file can go to underwriting; when an appraisal can be ordered and how many days a file has to sit if the loan amount, rate or APR are modified. Seriously, trying to understand each lenders “take” on these rules would have given Albert Einstein a migrane! And yes, this law is supposed to result in a better informed borrower and help curb deceptive lending practices by not allowing borrowers to be charged an up front fee including an appraisal fee prior to a waiting period. Will this end up helping any borrower or will it just add even more days and perhaps a couple extra weeks to the loan closing process?
Maybe these regulations will not be that big of a deal and perhaps what has my head spinning is a cummulative effect of all of 2009’s set-backs. Seriously, is this what the industry needs? Potentially longer turn-times?
For the purpose of this weeks column I will try to screw my head back on tight and cover just the basics of this new facet of our industry!
This Weeks Topic: HERA/REG Z
Ok- here are the basics of the new HERA rules for your review. Keep in mind that each lender will have their specific interpretation and guidelines to adhere/add to:
- Loan Submissions Requirements: Required on all purchases and refinances of primary residences and second homes. Investment properties not included.
- Fee Payment and Collection: No fees other than a reasonable credit report fee can be collected upfront until the borrower has received thte Initial Truth In Lending Disclosure.
- Ordering Appraisals: The appraisal cannot be paid for by borrower until the 4th business day after initial disclosures have been sent. No Post Dated Checks allowed! Appraisal can technically be ordered, but no fee can be collected up front.
- AP Changes: An increase in APR of more than .125% will require re-disclosure of the TIL and GFE at least 3 business days before closing.
- Waiting Periods for Loan Closings: Initial TIL must be provided at least 7 days before loan can close. Borrower has 3 days to review appraisal before they can close (some lenders will allow borrower to waive that right). Redisclosure of TIL with any changes adds 3 addl days to closing.
Processor Clue of the Week:
Due to the new rules, the processor and LO need to be partners more than ever before. They need to be speaking the same language and presenting a united front to the borrower, real estate agent, etc. with regard to timeframes and manage those expectations accordingly. This means a marked increase in communication between loan officers and processors as well as all parties involved in transaction-especially during the next 30 days. Setting proper expectation with the customer upfront will save LOTS of time and headaches! For real estate agent partners- a heads up to make sure they are writing contracts with realistic closing dates will be invaluable and possible save future relationships!
With the new HERA requirements, Anne Davis with Walker Jackson, emphasizes that it is important to get your borrowers email addresses to expedite the disclosure process. According to her company’s interpretation of the law, if you are closing in your name (lender status), an email receipt will serve as proof of disclosure receipt by client. This means you can order and collect fee from borrower on appraisal the same day email is sent.
If you are a broker closing in Walker Jackson’s name, they must receive the package first, but can immediately email the disclosures to the borrower if that information is provided. Otherwise, they must mail the package which kicks in the 3 day wait period.
Oh, and by the way, post dated checks are a “NO NO!”
So to expedite the turntime, it would behoove you to get accurate email addresses on all of your borrowers! Thanks for the tip Ann!
Penny For Your Thoughts: (Send us your questions and we’ll give you our two cents!):
Mike A. writes: “What is the deadline for me to comply with Red Flag Rules and what all is involved?”
The deadline for training and implementation is August 1, 2009-this Saturday! Must have employees trained on fraud detection, written program to detect and respond to potential ID theft and annual updates and review of program. Let us know if you need help with identifying a provider to help with this service.
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