New Legislation- H.E.R.A.

Just when you thought you knew the business and what is happening in the business, a new regulation gets implemented that very few agents are aware of and that will impact our business. The Housing and Economic Recovery Act (H.E.R.A.) requires that lenders provide the borrower with a Truth-in-Lending statement (nothing new) and that the borrower has 3 days to review it and no fees (other than credit report) can be collected from the borrower until the review period is over. Assuming the lender sends this out immediately, 3 days are allowed for mail and 3 days are allowed for review, then the lender can receive payment for the appraisal. Under the HVCC – appraisals can’t be ordered until payment for the appraisal is received – hooray! This is up to a 7 day delay in ordering appraisals up front. So be sure to make a special note of this scenario.

The next potential delay that can occur is closer to settlement. If the Truth-in-Lending form changes by more than an 1/8 tolerance of accuracy (used to be a ¼) a new Truth-in-Lending form needs to be reissued and, once again, the buyer needs 3 days to review after receiving it by mail, 3 days later for a potential additional 7 day delay. It is necessary to get your purchasers locked in early to avoid any delays or penalties for delays in closing. Also, you must do your due diligence to ensure the buyers of your listings are locked in well in advance of settlement. This scenario is very likely to happen on short sales and when we have delays in foreclosure settlements as a result of title problems.

If you have any additional questions about this OVER legislation of our industry, contact your lender.

Another area of concern is the sales price changes – increase price to cover closing costs – decrease price as a result of home inspection items – changing settlement dates – and even more…stay on top of your transactions so you don’t get crushed by them! Get it? Got it? Good!