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New Pro-Borrower Mortgage Rules Set For July 30th

It will be a new deal for real estate borrowers as of July 30th. That’s the day when new standards developed under the
Housing and Economic Recovery ACT (HERA)
go into effect.

Okay, so what’s the big deal?

In basic terms, the rule says that if you apply for a loan on July 30th or thereafter the lender must provide you with a good faith estimate of closing costs (GFE) within three business days. Also, you must get your estimate at least seven business days before closing — though borrowers can waive this requirement if they need to close in less than a week.

The new rule also says something else: The lender cannot charge you any fees before delivering the good faith estimate, the lone exception being a reasonable charge for a credit report.


The July 30th standards — which many lenders have already adopted — forces lenders to give notice and tell you the real costs of closing BEFORE you pay out any significant money for a new loan.

“Creditors,” according to the Federal Reserve, “must deliver or mail the early disclosures at least seven business days before consummation. If the APR contained in the early disclosures becomes inaccurate (for example, due to a change in the loan terms), creditors must ?’redisclose’ and provide corrected disclosures that the consumer must receive at least three business days before consummation. The disclosures also must inform consumers that they are not obligated to complete the transaction simply because disclosures were provided or because a consumer has applied for a loan.”

In other words, you can provide basic application information to a lender and elect not to go through with the loan and only be out the cost of a credit report.

Needless to say, some lenders who try to rope in borrowers with stiff “application fees” are appalled by the new regulations, which to them are — of course — unfair, unkind, impractical and no doubt socialistic. To humans who need a mortgage, the new rules merely create an element of fairness in the marketplace.

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Posted in: Closing

2 Comments on "New Pro-Borrower Mortgage Rules Set For July 30th"

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  1. I’m not sure that speed is a big issue to most borrowers. For a purchase, closing is typically 30 to 45 days down the road. For a refinance, maybe 30 days but sometimes less.

    What amazes me is to find that the day before closing the settlement agent has not completed the paperwork — even though all information was available long ago.

  2. Tom Floyd says:

    I am a mortgage lender. What this legislation does, in typical “we-want-to-help-the-consumer” fashion, is SLOW DOWN THE PROCESS. The new appraisal regulations have effectively slowed and made worse the appraisal piece of the transaction. Now the paperwork will be slower. The intention is good. People should know the real figures before paying fees for the services. But I promise people will be unhappy with this when their moving truck has to sit in the driveway while they wait for their 7 day evaluation period to go by because the TIL was slightly off.

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