There are two pieces of legislation that are impacting the real estate industry since the tightening of the lending practices.   These changes could lengthen the closing dates for purchase transactions.  I have seen it happen many times, even to well qualified buyers.

The first piece of legislation is the Home Valuation Code of Conduct (HVCC) which went into effect May 1, 2009.  The intent was to shield appraisers from undue influence from loan officers and lenders but installing a “fire wall” between the lender, underwriter and realtor from the selection of the appraiser.

HVCC also requires that borrowers receive a copy of their appraisal within three days prior of closing.  This means mailed within three days before closing.  The firewall required by this legislation means that the time that the appraiser actually gets the order to do the appraisal is longer and may take as much as two weeks or more after the agreement has been ratified.   Thus getting the appraial mailed within three days prior to closing is a challenge in some cases.

Housing and Economic Recovery Act – The HERA (Housing and Economic Recovery Act) amends and inpacts many different aspects of getting a mortgage such as:

1. The disclosures required for the borrowers
2. The timing of the delivery of such disclosures.

This minimum time requirement has forced the change of closing dates in quite a few transactions for buyers in the past few months.  Many times in mid-stream there are changes in the loan supplication that affect the Annual Percentage Rage (APR) and the entire process has to start all over.

Until these disclosures have been provided to or mailed to the borrow the only fees the lender may collect from the borrower is the credit report fee.  This could delay many aspects of the application process such as the appraisal.

Lastly the lender has always been required to provide a Truth in Lending (TIL) statement, which is the detail of the total expected costs that should be expected over the life of the loan.   The HERA states that should anything change in the loan application that could change the APR by more than .125% a new TIL must be reissued to the borrow a minimum of three business days before closing.  There are many things that could affect the APR such as:

1. Borrower accepting a higher rate of interest than initially qualified by floating their rate at application
2. A change in the loan amount
3. A change in product
4. A change in the closing date
5. Any changes in fees

There is more that I could say about the specifics of these legislative implications but my focus here is just to give you the basics.  In this climate I am recommending to buyers and sellers that we do not write into purchase agreements short closing time frames especially when financing is involved.  Ideally I would recommend no less than 45 days from ratification.

If you need information on how this will effect your real estate closing I would be happy to review your specific file individually.  Just give me a call or email me and I promise to follow up right away.