Due to the mortgage melt-down initially caused by the sub-prime mortgage crisis, Congress passed a slew of new laws and regulations benefiting home owners and home buyers.
Mortgage lenders have, for some time, been required to provide home loan applicants a full disclosure of mortgage costs including the Annual Percentage Rate (APR) within three days of applying for a loan. Lenders are now prohibited from collecting loan and application fees from applicants, with the exception of a reasonable charge for a credit report, until the applicant has received the Truth in Lending disclosures detailing the costs and the APR. After receipt of the disclosures, applicants must wait at least seven days before the home mortgage can be closed. This period of time is intended to allow them time to think about the transaction they are about to enter. If after that time, the buyer goes to closing and the APR disclosed on the loan documents varies by more than .125% (1/8 of 1.0%), the lender must wait another three business days before closing the loan.
New laws require lenders to deliver a copy of the real estate appraisal three days before the scheduled closing. Previous federal regulations required lenders to give notice to borrowers that they could request a copy of the appraisal; however, lenders and home buyers often did not follow through. It is now a requirement unless specifically waived by the applicant.
The SAFE Act was designed to increased consumer protection and decrease fraud in the mortgage industry. To do this it introduced new minimum national standards for licensing and registering mortgage loan originators. They now have to pass tests and submit to fingerprinting and background checks by the FBI through the Nationwide Mortgage Licensing System.
The Truth in Lending Act was also amended to change how mortgage brokers are compensated, ostensibly to safeguard consumers from unfair practices involving brokers and loan originators.
There are now many more regulations protecting the consumer and intentionally lengthening the time the process takes to eliminate the “quick close” to allow more thoughtful and deliberate transactions..
Karmin Laramie Lynam is a mortgage loan officer at Commerce Bank of Arizona, an Arizona based community bank specializing in serving residents and small to mid-size businesses in Arizona. Karmin may be contacted at email@example.com or 520.797.6655.