How the new government regulations impact your closing dates

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Presenter Name

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Homeownership

Today’s environment presents us all with great opportunity to help make the dream of homeownership achievable and sustainable for more people in our country.

We thank you for working together to capture this opportunity and for helping us all to lead the way in making the mortgage lending process more transparent and understandable to our mutual customers.

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New government regulations - background

In 2008, Fannie Mae® and Freddie Mac® adopted the Home Valuation Code of Conduct (HVCC) to reinforce appraiser independence, valuation protections, and enhance the overall integrity of the valuation process.

For our mutual customers, HVCC: promotes the accuracy of appraisals by shielding appraisers from

undue influence, and; ensures that borrowers have sufficient notice of appraisal content by

requiring that they receive a copy of their appraisal reports no less than 3 business days prior to the closing of their loan. HVCC was

effective May 1, 2009

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New government regulations - background

Also in 2008, amendments to the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA) were passed by Congress, and the Federal Reserve Board published the regulations under the Truth in Lending Act (TIL).

These regulations were written to: Provide a more transparent, level and fair regulation of the real estate industry; Add additional steps to help prevent deceptive lending practices; Protect consumers by making them more informed — and therefore more

confident — in their home financing choices.

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New government regulations - background

On July 30, 2009, the new Housing and Economic Recovery Act (HERA) regulations will go into effect.

They require all mortgage lenders and brokers to help prevent deceptive lending practices and protect customers by helping them become more informed.

These new requirements could impact your closing dates.

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Four key elements you need to know

#1 If the homebuyer is financing the property, these new regulatory and investor guidelines will impact—and could even dictate—the closing date:

Purchase contracts can still be written with a specific closing date in mind, and we recommend you plan on at least a 30-day close.

Going forward, the earliest any “rush” transaction for a home purchase can close is 7 business days after the homebuyer is issued his or her initial mortgage disclosures.

To set appropriate expectations for customers, it is critical that REALTORS® work with us upfront to discuss the closing timeline

Note: Saturdays, with the exception of federal holidays, do count as a business day for the purpose of disclosures only.

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Four key elements you need to know

#2 Upfront fees cannot be collected by the lender until the initial disclosures are received. Fees are needed to order the credit report, appraisal and get the process underway.

Upfront fees can be collected immediately when the application is taken face to face and the homebuyer receives his or her initial disclosures.

For phone applications, if the initial disclosures are sent overnight air, they are considered “received” the next business day— allowing the fees to be collected on the following business day.

Note: The only exception to upfront fee collection is the credit report fee which can be collected at application, including preapprovals.

Back to basics – let’s focus on having homebuyers apply face to face!We are going to send the initial disclosures via overnight mail.

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Four key elements you need to know

#3 The homebuyer must be provided with a copy of his or her appraisal a minimum of 3 business days prior to closing:

To help expedite the process, we have elected to have a copy of the appraisal sent directly to the homebuyer.

The HMC will be notified of the appraisal and is encouraged to review it before the homebuyer receives his or her copy.

Note: If, for whatever reason, the homebuyer believes the 3-business-day required review period is NOT necessary, he or she has the right to waive that requirement upfront.

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Four key elements you need to know

#4 An increase of more than .125% in the Annual Percentage Rate (APR) from the initial disclosures requires the TIL to be revised and reissued (“PreClosing TIL”) to the homebuyer at least 3 business days before closing.

This provides the homebuyer with time to review and feel comfortable with his or her loan choice.

If mailed via US postal service, the TIL disclosure is considered “received” 3 business days after mailing.

Note: To help expedite the process, it is critical on the front end to ensure that estimated fees by the settlement agent/attorney are as accurate as possible.

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The new mortgage process and timeline

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Working together to ensure timely closings – we all play a key role

The Homebuyer’s Role Obtain a credit-checked preapproval before shopping for a home. (Applying face to face may help

expedite the process.) Review the timeline and potential impacts with their home mortgage consultant in order to keep their

REALTOR® or Builder informed. It is wise they plan for at least a 30-day close. The impacts of the new regulations and investor requirements are outlined in the initial disclosure packet

they receive. Any questions should be discussed with their home mortgage consultant. Know that these new regulations and investor requirements are in place to ensure they have time to

consider their loan choice and feel confident to move forward. Review the appraisal delivery disclosure and determine whether or not they wish to waive the 3-business-

day review period prior to closing. Understand that the interest rate on their loan impacts the APR. This means that until they lock in their

rate, an exact APR cannot be determined. Minimally plan on locking at least 10 business days prior to the date they wish to close. Understand that a change in their mortgage product, the addition of a home equity loan or line of credit,

etc. could impact their APR and, therefore, their estimated closing date. Understand that changes in fees by third parties, such as their settlement agent, could also impact their

closing date.

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Working together to ensure timely closings – we all play a key role

The REALTOR® or Builder’s Role Set realistic expectations upfront and throughout the transaction with the listing agent, the seller and the

homebuyer in regards to potential closing dates. It is wise to plan for at least a 30-day close. Discuss these new provisions with your settlement agents immediately to avoid unnecessary delays down

the road. It is critical that any third party fees that impact the APR are accurate, because any change of fees that increases the APR more than .125% will require the lender to re-disclose the TIL (“PreClosing TIL”) allowing the homebuyers the required 3 business days to determine if they are comfortable with their loan choice.

Provide the settlement agent information to the lender as early in the process as possible. Make sure the homebuyers understand that their interest rate impacts their APR and that until that rate is

locked (which is at their discretion), the initial disclosures will not be accurate, so a PreClosing TIL disclosure will likely be needed.

The best way to possibly expedite the close is to lock in the rate and fees as soon as possible.

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Working together to ensure timely closings – we all play a key role

The Settlement Agent or Attorney’s Role Make sure any third party fees that impact the APR are accurate – understanding any change to fees that

impact the APR could lead to a required re-disclosure of the TIL (if the changes collectively increase the APR more than .125%). The re-disclosure requires the homebuyer, after receipt, to be given an additional 3-business-day review period prior to closing.

Work proactively on providing a preliminary HUD with accurate fees to lenders at least 10 business days before closing. This will enable lenders to issue the PreClosing TIL 7 business days prior to the scheduled closing date. This allows 3 business days for mailing and provides the homebuyers with the time required to determine if they are comfortable with their loan choice.

Potential APR Impacting Items

• Any title charges (including escrow charges), such as:

• abstract or title search• examination• insurance binder• insurance

• Settlement or closing fees, such as:• Doc preparation fee• Notary fees• Attorney fees• Sub-escrow fee• Recording fees

• Other

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Working together to ensure timely closings – we all play a key role

The Lender’s Role Help homebuyers understand timelines and anything that can impact their closing date. It is wise to

encourage homebuyers, REALTORS®, and Builders to plan for at least a 30-day close. Take applications and help homebuyers understand their product options. Issue homebuyers their initial disclosures. Collect upfront fees so that all vendor products can be ordered in a timely manner. (Note: unless the initial

disclosures are handed to the homebuyer the same day as you take his or her application face to face, fees cannot be collected until the next business day after the homebuyer has been received his or her initial TIL).

Ensure the loan is locked at least 10 business days prior to the desired close date. If the APR increases more than .125% , the lender must re-disclose the TIL (“PreClosing TIL”) in time to

provide the homebuyers with the required 3-business-day review period to determine if they are comfortable with their loan choice.

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HMC Name(xxx) xxx-xxxx Cell(xxx) xxx-xxxx Office

Office Street AddressCity, State Zip This information is for real estate professionals only and is not intended for distribution to consumers. Information is accurate as of printing and subject to change without notice. #105336 7/09

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