Slowing down the lending process

In hopes of better protecting the consumer, our government has changed regulations that govern residential mortgages. I heard from Jill Buzny at Wells Fargo Mortgage about the changes that are afoot:

These changes are meant to protect consumers by not allowing lenders to charge fees until the application is completed, requiring that the consumer gets a copy of his/her appraisal in a timely fashion, and requiring that the Truth in Lending Statement be accurate and presented in a timely fashion to the buyers.

As these changes come into practice, expect delays in your loan processing. There will be times when the time-table will need to be shifted back because consumers need to get information before they can be charged for application fees (delaying the application), and closing may be delayed to give consumers ample time to review their appraisal and to get a correct Truth in Lending Statement.

1. The earliest any home purchase transaction can close is 7 business days after the
homebuyer is issued his or her initial mortgage disclosures from the lender.
Starting July 30, 2009, upfront fees can be collected immediately when the application is taken in person and the homebuyer receives his or her initial disclosures. The only
exception is the credit report fee which can be collected at application.

2. The homebuyer must receive the appraisal at least 3 business days prior to the mortgage
closing. This means the home buyer may receive his or her appraisal before or
simultaneous to the lender receiving their copy. If the homebuyer believes the
3-business-day required review period is not necessary for whatever reason, he
or she has the right to waive that requirement.

3. An increase of more than .125% in the Annual Percentage Rate (APR)
from the initial Truth in Lending Disclosure (TIL) requires the TIL
disclosure to be revised and reissued to the homebuyer. The homebuyer
must receive a revised TIL disclosure at least 3 business days before
closing, providing the homebuyer with the time required to determine if the
homebuyer is comfortable with his or her loan choice. If mailed, the TIL
disclosure is considered “received” 3 business days after mailing.

Many things may be changed or finalized throughout the course of the transaction, there are a number of things that can impact the homebuyer’s APR. Therefore it is critical
on the front end to ensure that estimated fees are as accurate as possible.

Things that can affect the APR of a loan:

• Unlocked rate
• Change in loan amount
• Product change
• Rate re-lock due to market improvement
• Change in closing date
• Changes to fees, inclusive of settlement agent fees

Do you think these changes could help consumers get better loans?

When did you get charged your application fee? Did you see your appraisal? Did your initial Truth in Lending Statement come close to the final one you saw at closing?