What does HERA mean to you? (And no, the answer is not “Zeus’s wife and sister.”) HERA amends the Truth in Lending Act (TIL), implemented through Regulation Z and has a number of provisions including the Mortgage Disclosure Improvement Act. This directly impacts the Truth in Lending Act requirements surrounding early and final disclosures to home buyers and addresses the timing of when fees can be charged. Early disclosures must still be provided no later than three days after receipt of a written application. Under the new rule, which many investors have already implemented, early disclosures must also be provided at least seven business days before closing/signing, i.e., the new seven business day rule that requires that closing docs may be signed only after a seven business day wait period from when the initial disclosures were mailed.

HERA also addresses upfront fees. Beginning July 30th, lenders/creditors will no longer be able to collect fees of any kind (except for a reasonable credit report fee which can be collected at application) from applicants until such time as the early three day disclosures from the creditor/lender have been received by the applicant. Lenders must ensure any third party they use to source a loan complies with the new regulation. Disclosures are considered “received” 3 full business days after mailing, allowing the fees to be collected on the fourth business day. Historically, upfront fees could be collected immediately. This also means that the appraisal cannot be requested until the fourth business day.  And while we're talking about appraisals, the borrower must be provided with a copy of his or her appraisal a minimum of 3 business days prior to closing. The appraisal is considered “received” 3 business days after mailing.

One other thing to remember, among many: an increase of more than .125% in the APR from the initial TIL Disclosure requires the TIL disclosure to be revised and reissued to the borrower. The borrower must receive a revised TIL disclosure at least 3 business days before closing, providing the borrower with the time required to determine if the borrower is comfortable with his or her loan choice. Again, the TIL disclosure is considered “received” 3 business days after mailing.

Proponents will say that CitiMortgage, who is not taking correspondent registrations for 8 days starting at the end of business today, will use the time to "get their house in order" and come out stronger than before. Skeptics will say that no investor cuts off locks unless something is dramatically wrong, and other investors are licking their chops. Regardless, most sellers know that Citi has priced very aggressively in recent months and had an incredibly fast turnaround time in purchasing loans - a difficult balancing act for successful operations. Citi admits that “there remain key areas that sometimes fall short of our quality control process”: Valuation concerns, income documentation is missing or incomplete, HUD-1’s adequately addressing fund transfers and pay-offs, asset documentation being missing or incomplete, and credit reports being missing or incomplete. “To give this the focus it needs, we will be discontinuing the acceptance of registrations for eight business days. During this period, we will reengineer our process to ensure all quality controls are enhanced and processes changed where needed to be, in order to be assured our loan purchases going forward meet our investors’ requirements.” Existing registrations will still be allowed to lock, and all loan purchases will continue – you just can’t lock in a rate.

Without admitting any wrongdoing, Taylor, Bean, & Whitaker has agreed to pay Massachusetts,  Arizona, Florida, District of Columbia, Pennsylvania, Vermont, Georgia, Idaho, Illinois, Louisiana, Maryland, Mississippi, New Jersey, and North Carolina, $9 million to help them oversee the company's mortgage lending practices. The agreement comes from loans funded in 2006, primarily IO's, payment-option ARM's, and stated income deals.

I should mention that an item that I wrote about last week (regarding Kondaur’s volume increase) should be attributed to a reporter from Housingwire. My apologies. http://www.housingwire.com/2009/06/18/kondaur-to-snap-up-28000-distressed-assets-by-years-end/ 

For you fans of condo lending, in March Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70% of the units have been sold, up from 51%, and supposedly Freddie Mac is due to implement similar policies next month. The Wall Street Journal says that in a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70% sales minimum "may be too onerous" and could lead condo buyers to shun new developments, and they asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added.

Back to interest rates… given the lack of news, the focus has been more on the equity markets around the world – which have helped interest rates. During the overnight session the World Bank comments continued to linger from the prior day: our stock market was down, and Asian stocks fell. Today buyers will have the privilege of bidding on $40 billion of 2-yr notes at 1:00EST, but we also have Existing Home Sales due out at 7AM PST. Ahead of that the 10-yr is at 3.72% and mortgage prices are worse by about .125.

Last weekend I was driving when a traffic camera flashed. I thought my picture was taken for exceeding the speed limit, even though I knew I was not speeding.

Just to be sure, I went around the block and passed the same spot, driving even more slowly, but again the camera flashed. I thought this was quite funny, so I slowed down even further as I drove past the area, but the traffic camera flashed yet again.

I tried a fourth time with the same result. The fifth time I was laughing when the camera flashed as I rolled past at a snail's pace.
Two weeks later, I got five traffic fine letters in the mail for driving without a seat belt.

Rob

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