NEW GOVERNMENT REGULATIONS MAY IMPACT YOUR CLOSING DATE
When it comes to the $8,000.00 Federal First Time Home Buyer Tax Credit, you can't afford to wait until the last minute to purchase a new home. In 2008, the government changed some of the laws and regulations associated with mortgage lending including the adoption of the Home Ownership and Equity Protection Act ("HOEPA"), the Housing and Economic Recovery Act ("HERA"), new Truth in Lending Act disclosure regulations, and the Home Valuation Code of Conduct ("HVCC"). To view the new Truth in Lending Act regulations, click on: Revised TILA Regulations.
Here is a summary of the new regulations:
- Initial Loan Disclosures: Within three business days after the submission of a loan application by the borrower to the lender, the lender must provide the borrower with the initial Truth in Lending Act disclosures.
- Mandatory Review Period: The lender may not close the loan until seven business days after the delivery of the initial Truth in Lending Act disclosures.
- Revised Disclosure Requirements: If the APR disclosed on the initial Truth in Lending Act disclosure increases by more than .125%, the lender must provide the borrower with revised Truth in Lending Act disclosures at least three business days prior to the closing date.
- Appraisal Report: The lender must provide the borrower with a copy of the appraisal report three business days prior to the closing date.
POTENTIAL IMPACTS ON THE APR
The borrower, their agent, and the lender must be aware of these requirements and must manage the loan process to minimize the possibility of delays in closing dates attributable to changes in the APR. Here are common occurrences that may impact the APR and may thereby trigger the requirement that the lender provide revised Truth in Lending Act disclosures to the borrower with or without the three day waiting period after the delivery of the disclosures:
- Unlocked Rate
- Change in Loan Amount
- Loan Product Changes
- Rate Re-Lock due to Market Improvements
- Change in Closing Date
- Changes in Loan or Settlement Fees
HOW TO AVOID DELAYED CLOSING DATES
In today's lending climate, it is important that the purchaser/borrower, real estate agent, lender, and settlement agent work together to ensure timely closings. Each participant in the sales transaction has a role to play. Here are some general tips and suggestions:
For the Borrower/Purchaser:
- Obtained a credit based pre-approval letter prior to searching for a new home.
- Plan for at least a 30 day close.
- Request a written time line of the loan process so you know and understand the deadlines for each step in the loan process and understand the impact that missed deadlines may have on your closing date.
- Review the appraisal requirement and consider whether or not to waive the 3-day review period prior to closing.
- Select your loan product and lock your interest rate at least 10 business days before the closing date.
For the Real Estate Agent:
- Set realistic expectations by providing the borrower/purchaser with a time-line with milestone dates associate with the loan process.
- Discuss the new regulations with the borrower/purchaser specifically explaining what actions or changes might impact the closing date.
- Manage the loan process, including missed deadlines that could impact the closing date.
- Confirm that accurate settlement fees are promptly sent by the settlement agent to the lender at least 10 days prior to the closing date.
For the Lender:
- Promptly obtain information from the settlement agent regarding closing fees.
- Promptly issue the initial Truth in Lending Act disclosures at least 3-days after the submission of the loan application.
- Confirm selection of the loan product and lock the interest rate at least 10 days prior to the closing date.
- Promptly issue any revised Truth in Lending Act disclosures at least 3-days prior to the closing date.
For the Settlement Agent:
- Provide the lender with accurate settlement fees upon receipt of the initial title order.
With a little planning, these new regulations shouldn't impact you closing date.
Interested in learning more about the loan process, the $8,000 Federal First-Time Home Buyer Tax Credit, or builders offering "guaranteed delivery dates" on new home construction in connection with Federal First-Time Tax Credit program? Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or send an e-mail to Ryan@PREASignatureRealty.com.
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PREA SIGNATURE REALTY
PREA Signature Realty is a full service brokerage located at 1709 Park Avenue in the Lafayette Square neighborhood of the City of St. Louis. PREA Signature proudly serves the following city neighborhoods: Lafayette Square, Soulard, Benton Park, Benton Park West, Downtown Loft District, Forest Park Southwest, Central West End, Tower Grove East, Tower Grove South, Compton Heights, Shaw, The Hill, Dogtown, Carondelet, Holly Hills, St. Louis Hills, Dutchtown, and the Other Historic Neighborhoods of the City of Saint Louis, Missouri.
The opinions expressed herein represent the opinions of the author only and do not reflect the opinions of PREA Signature Realty. All photos and written content were produced by PREA Signature Realty. All Rights Reserved - PREA Signature Realty (2009). This content may not be reproduced or reprinted, except for Active Rain re-blogging, without express written permission of PREA Signature Realty.
For more information, visit our website at www.PREASignatureRealty.com or contact Ryan Shaughnessy at 314-971-4381 or send an email to Ryan@PREASignatureRealty.com.
This is so true! If buyers want to purchase for the $8,000 tax credit, they really need to find their new home by October 15th!
Ryan- Great Outline- too often the timelines impede the progress of a sale when not adhered to. Thanks for enlightening us to the new legislation and timelines.
Ryan--This info applies to many loan programs since the RE melt-down as the banks have tightened the loan verification process. More regulations, more documentation means more time is needed. Your graphic is so appropriate.
Thanks for the Great post. I have written a brief post about the deadline and mentioned that buyers buying a short sale shoulod be careful .
I will bookmark this and share with buyers.
Thanks for sharing how the new law will impact us, consumers and lenders. Good to have it broken down like that. I will bookmark to refer back to and plan accordingly.
Ryan, what an important post. I'm seeing impact business and it is a challenge to explain it all to some clients. So I really appreciate you doing it.
Hi Ryan, Good post. Thanks for sharing.
Best - Sash
Crystal - I agree. Time is definitely running out for first time homebuyers using the federal tax credit.
Florida Pines - Normallyl, I would be less concerned by timelines. However, with the hard deadline associated with the $8k, purchasers need to know the deadlines and what can impact their closing date.
Mary - Add to your list appraisal review by lender and PMI underwriters. The process does take longer now.
Gita - Slow short sale approval, new construction delays, inexperienced lender - just a few ways a buyer could blow the time deadlines on the federal tax credit.
Missey - I am glad it helps. It took 17 pages of regulations to describe three of the four requirements listed in the post.
Janice - We have prepared an addendum to our buyer's agency agreements and sales contracts addressing the impact of delays on the federal tax credit. I suspect that some purchasers will late to the last minute and in the rush to close will miss the Dec. 1 deadline.
Sasha - Thanks for reading.
Ryan:
This is a great post. Forewarned is for armed.
I will reblog and flag this.
Jim - Thanks. It is always good to know what the timelines are and how they might impact the sale. With the federal credit, I suspect that November will be an interesting month for buyers trying to get sales closed to take advantage of the tax credit.
Thanks, best thing to do is work with a mortgage company that makes sure all the timelines are met to keep your closing on time