HVCC was a gut punch. But this part of HERA is like a “ELBOW DROP”

Coganomics: Recession is OVER!!!!(Series-18)

Good morning, today is July 21 2009

Hey listen. Today we have a special for you. Most of you are unaware of the changes that are going to hit your business in the next couple of days. Really I think HERA is going to have an equal if not greater impact on your borrowers than HVCC. And you know how I feel about HVCC.

The following blog is intended to let help you understand what you are going to face in the coming months.

There is a good chance you haven’t heard of the Housing and Economic Recovery Act, and yet it starts, oh, July 30th 2009. HERA as it’s known, is going to affect how your loan is processed. But more importantly, it’s going to effect the time frames you’ve become accustomed to. HERA is the new truth in lending process, that will effect every borrower , on every loan, with every lender you work with.

The original truth in lending (or TIL as I know it) was designed let your borrower know exactly what the cost of the loan was going to be. Currently, the truth and lending, or your till, must be delivered to the borrower within 3 business days of the application for all mortgages. And must inform the borrower of finance charges, the annual percentage rate, the amount financed, the schedule of payments and total payments.

Well there’s two main points of HERA with respect to truth and lending.

First Hera states your borrower must be given the truth and lending form 3 days prior to any fees being charged with the exception of the credit report.  In other words, your lender can’t even collect on an appraisal. And in a case of an HVCC order the appraisal, until your client has looked at the truth and lending for 3 days.

Well here is the problem how do I know when your client has actually received the information? Well in the case of a some lenders , they are currently assuming 3 days mail time and an additional 3 days review time. So, the earliest your client will be able to move his file further down the road to docs and funding is 7 additional business days.  YES 7 ADDTIONAL F’EN DAYS!!

Secondly, according to HERA, the revised truth in lending must be within 1/8 tolerance of accuracy where before it only had to be ¼%.

That means they are tightening the screws down on this thing guys. Given that fees start as estimates and are updated through the transaction, this means you are more than likely to have to need to disclose your truth in lending at precisely the moment you think you are going to sing your load documents.

What this means is you are probably looking at another 7 days at the end of your transaction. You may want to take this into consideration when looking at time frames with your clients.

To give you an idea of how many possibilities your lender has to mess up the truth in lending tolerance, we have been scrolling all the APR fees that could potentially derail your transaction.

So basically HERA remains at least 7 more days at the beginning of your transaction and 7 more days at the end.

Could I be wrong and could these timeframes be slightly shorter or slightly longer? Well the honest answer is maybe. And even though HERA goes into effect just a couple of days from now, it seems only a couple of lenders have HERA guidelines in place.

And the truth is, there’s more questions that there are answers.

I just wanted to give a reminder, in advance, before you ask the obvious question of, why is this this short sale funding taking so long?

So here is the skinny with no bull… Your lender is going to have to lock in your clients loans for a longer period of time– which is going to cost your client more money, period.  Delays in escrow, well, they can cost your seller more money, period.

Quick Short Sale Tips & Tricks:

Remember all those short sale per diems you are dealing wit?

Starting July 30th you can expect further delays on closing all of your transactions. More costs, longer time frames, more paperwork. And really, more of the same. But don’t worry, it’s all being done in your clients best interest.

Set real expectations and shot for approval letters for 45 days and no less than 30 days.

For More Short Sale Tips & Tricks Visit:  www.ShortSaleCommissionMachine.com

Tags: appraisal HVCC, HERA, Housing and Economic Recovery Act, jeff coga, JeffCoga.com, New Lending and Real Estate Laws, Original Truth in Lending, Short Sale Tips & Tricks, shortsalesbuyers.com