On July 30, 2009 legislation went into effect that is impacting the timeliness in which Texas Mortgage Companies can close a mortgage loan. This new law is called HERA which stands for new Housing and Economic Recovery Act. This piece of legislation is intended to protect the borrower from deceptive lending practices. If your broker/lender is not educated on this new law, it can cause numerous delays. As a Texas Mortgage Banker, Lone Star Financing and our mortgage team has embraced the new laws and changes that shape our industry.
Below is a summary of what the HERA law entails.
1. Other than a credit report fee, no upfront fees can be collected until 4 days after the initial disclosures have been signed by the borrower. This change prevents Texas mortgage lenders from collecting any sort of upfront fee just to look at your file.
2. Along with the collecting of upfront fees, the appraisal cannot be ordered until the fourth day after the initial disclosures have been signed by the borrower.
3. The borrower is to receive a copy of the appraisal three days prior to closing. This prevents the borrower from having to send a letter requesting a copy of the appraisal that they paid for.
4. A final good faith estimate and truth in lending must also be signed three days prior to closing. If the APR changes by more than .125%, the borrower must resign and date the good faith estimate and truth in lending. This creates a new three day wait period. This is in place to prevent initial undisclosed fee changes at closing. There is nothing worse than going to closing and seeing added fees to your settlement statement.
Now that you understand the new potential delays let me tell you how it can affect your potential client. The first issue comes up when there is an inspection contingency period in the contract that states you have 10 days to inspect the property once you are in escrow. With close to 10 day delays on the mortgage side of the transaction with the new HERA law, canceling a transaction due to waiting periods can ultimately cause problems or a loss of your option money.
The second potential problem for you client falls with the lock period. It is difficult for most Texas Mortgage Companies to lock in the client’s rate for 30 days with no signed documents from the borrower. Again there are too many delay periods.
Here is the solution to the problem, get PRE-APPROVED first. This will prevent future delays to your client’s loan process. With pre-approved clients, Lone Star Financing can close your client’s loan in 30 days or less.
In my opinion the government did need to step in and try to undo the problems facing the mortgage industry today. HERA may sound like a big problem but in all actuality if you know how to work with the law, everyone ends up pleased. As I mentioned before, this is nothing new to our group. If you are a borrower or realtor and have any concerns or questions regarding the new HERA laws, please feel free to email, call or leave a comment below and I look forward to responding to your questions.
Rachel McGuire
Mortgage Banker # 80385
512-750-9197
Rachel (@) lonstarfinancing.com
