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HERA: Housing and Economic Recovery Act (effective July 30, 2009) Could Impact Closing Dates

Recent Federal legislation (HERA - Housing and Economic Recovery Act - effective July 30, 2009) could impact the closing date of your real estate transaction.  When completing a purchase agreement, consider a conservative closing date of 30-45 days from the accepted contract date.

HERA was designed to ensure that the borrower(s) involved in the transaction are given accurate disclosure information (Truth in Lending Statement pertaining to Annual Percentage Rate or APR) regarding the loan they are applying for and adequate time to re-evaluate their decision to proceed in the event of any changes that would impact their costs to finance.

Key points of HERA:

  • No fees may be collected for the transaction other than those for running a credit report at the initial time of application. Additional fees may be collected only after four business days.
  • Should the APR change by more than .125% on a fixed rate loan or .250% on an adjustable rate loan, the lender must disclose the new APR and the borrower must have a minimum of three business days to review the information before the transaction may proceed.
  • Items that can trigger re-disclosure requirements include a change(s) in the loan amount, closing date, loan program, interest rate changes (waiting to lock interest rate), any fees that impact the APR or interest rate from the rate indicated on the original loan application.
  • In cases where documents are sent by mail to the borrower related to re-disclosure of APR and/or providing a copy of the appraisal, anticipate six business days (three to allow for mailing and three to allow adequate time to review them) before a closing can occur.

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