HVCC, HERA, HOEPA - New Regulations for Mortgage Industry
The Federal Government has been busy trying to regulate the mortgage industry to try to avoid the continuing debacle caused by the sub-prime mortgage debacle. In 2008, Congress passed the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA). In addition, semi-public Fannie Mae and Freddie Mac adopted the Home Valuation Code of Conduct (HVCC). While better regulation is welcome (Canada, for example, had a better regulated banking/mortgage industry and as a result they are not experiencing the same problems the US is experiencing), but their implementation timing may affect (adversely) the swift recovery of the real estate industry. Here is a brief explanation of what they are and the consequences these acts may have for the average buyer or seller:
HVCC: This act was passed to ensure the accuracy of appraisals by shileding them from undue influence (i.e. mortgage originators) and requiring that borrowers receive a copy of the appraisal no less than 3 days prior to the closing.
HERA: This act amended the Truth In Lending Act (TIL) and includes a number of provisions regarding early and final disclosures to homebuyers, fees charged and their timing.
How does this affect the general public?
- If the buyer is getting a loan, these new regulations could affect the closing date. The earliest a home purchase transaction can close is 7 business days after the lender has issued their initial mortgage disclosures to the buyer.
- Upfront fees for mortgage application (except for credit report) can only be charged by the lender after the initial disclosures are presented to the home buyer.
- Homebuyers have to receive a copy of their appraisal a minimum of 3 business days prior to closing.
- Any increase of more than 0.125% in the Annual Percentage Rate (APR) of the loan (from the initial Truth In Lending Disclosure) now will require that a new TIL must be issued to the buyer (at least 3 business days prior to closing).
Basically, although there will be MORE TRANSPARENCY, many of these regulations MAY DELAY CLOSINGS because lenders now have to wait the stipulated time before the closing can take place.