HERA, HVCC, and Other Fun Acronyms- Ready for New Lending Rules?

August 3, 2009 | By Kelley Koehler | Filed Under Home Buying, Loans and Financing

Starting July 30th, 2009, there’s some new disclosure rules for mortgages – an update to the Truth in Lending regulation (also called Reg Z, if you want to use the fancy lingo). They call this one HERA – the Housing and Economic Recovery Act. The highlights:

The new requirements apply to all mortgages where the owner lives in the property as either a primary or secondary residence, and includes refinances.
Good faith estimates are to be provided within 3 business days after you apply for a loan, and the lender can’t collect any fees before that disclosure is provided – except to collect a reasonable credit report fee.
Closing can’t happen until 7 days after you get that early disclosure, as a waiting period.
If your APR increases by more than 0.125%, the lender has to give you an updated disclosure, and wait another 3 days before the loan can close. Remember that an APR includes not only the interest rate, but factors in other closing costs and fees.

So basically, you’re supposed to get disclosures earlier, not pay any big fees until you have time to review them, and if your costs and/or interest rate make a big swing, you’re supposed to get an updated disclosure.

Also – and this rule started May 2009 – for conforming loans, those that conform to Fannie Mae/Freddie Mac guidelines, there’s another rule. This one is HVCC – the Home Valuation Code of Conduct.

HVCC is an attempt to make the appraiser more independent – less likely to be influenced by a lender or an agent or a buyer or a seller – and to make sure a borrower gets to see their appraisal. HVCC states that borrowers receive a copy of their appraisal report no less than 3 days prior to closing their loan – unless the borrower waives this requirement.

There was quite a bit of hubbub when HVCC came out – that agents weren’t allowed to communicate with the appraiser, that they’d delay closing because of long appraisal timeline allocations, that appraisers were working in areas outside their expertise. FHFA issued a document to try and clarify some of those conerns. Fannie Mae has a FAQ about HVCC as well. And of course, links to all kinds of HVCC information over at Realtor.org.

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