New Lending Regulations 7/30/09
Two new federal lending regulations effective July 30, 2009 will tighten
the belts on banks, brokers, and credit unions. In an attempt to protect home
buyers from predatory lending practices, the HERA and HOEPA laws were
passed. HERA, the Housing and
Economic Recovery Act and HOEPA, the Home Ownership and Equity Protection Act
will provide more information to home buyers prior to signing a
mortgage.
When interviewing lenders for a mortgage, have them provide a GFE, Good
Faith Estimate and a TIL, Truth in Lending Disclosure. The Good Faith breaks down the out of
pocket cost and monthly payment for the home. The Truth in Lending Disclosure provides
the actual cost of borrowing the money over the term. The Final Truth in Lending Disclosure
and costs must be given to home buyers 4 business days before closing or
sooner. The APR, annual percentage
rate will now requires the lender to disclose their fees and all third party
costs placed on the closing statement.
The appraisal process has also been modified to protect you. The lender you choose will not have
knowledge to who will be selected to verify the value of your house
purchase. The appraiser will review
the last six months of similar closed properties to establish value. Any appraisal required repairs must be
negotiated between buyer and seller, work completed, and re-inspected prior to
closing.
The new lending regulations are designed to help you avoid surprises at
the closing table. Comparing
lenders payment options with the Good Faith Estimate, determining the true cost
of money with the Truth in Lending Disclosure, and tightening the appraisal
process to determine a more accurate value, and providing the final numbers
before closing all make you a smart home buyer. The state of
