HERA Update

A hot topic for brokers is the HERA laws. They are the laws requiring a re-disclosure of Truth-In-Lending documents if your APR increases by an 1/8 of a percent, or .125%. After seeing it in effect for a few weeks, I can say that doing your due diligence is a must! Each bank has applied their own specific twists, which could easily delay settlements. The law only applies to a 1/8 increase, it does not apply if the APR decreases by an 1/8. Most brokers are estimating 30 days of pre-paid interest and higher escrows on their good faith estimates, so if something some changes in the loan, it will not increase the APR by more than 1/8. This will look high to some borrowers and it should be the brokers responsibility to explain the details of the GFE and why the fees are high. Realtors also must be educated on this, since it will be very difficult for buyers to close in 30 days. Another issue that has come up, is that banks will place a hold on collecting the money for an appraisal until after they have disclosed their own TIL to the borrower. You need to make sure you know how many days and what triggers the clock from each specific investor. Some are 3 business days and some are as high as 7 business days. I would even check to see if an investor has a final TIL disclosure or approval QC, which could cause another delay, in addition to the original one. The government has gone from giving anyone a loan, to making loans to very few people, even if they are quality borrowers.    

• DC Metro Area Senior Loan Officer
• Bethesda Homes