Will Government Regulations Mess Up Your Real Estate Closing?
July 29th, 2009 categories: Pricing
The mortgage industry has been under siege to provide homebuyers better information when it comes financing loans.
In 2008 amendments to Home Ownership & Equity Protection Act (HOEPA) and the Housing Economic Recovery Act (HERA) were passed by the Congress and the Federal Reserve Board published regulations under the Truth in Lending Act (also known as ”Truth in Confusion Act” by many).
The impact of HERA (effective July 30, 2009) may impact future closings because of the timeframe requirements. The intent – to keep buyers informed about any impact on APR (annual percentage rate). The outcome may be many closings delayed by three days because the lender did not provide updated information to the borrower in a timely manner,
So you have sold your home (this only impacts transactions after July 30th) and expect to close August 28th. You, the buyers, agents and title company sit down at the closing table….and because proper documentation was not provided to the buyer 3 days earlier- the closing will not happen on August 28th.
The greater Cincinnati market prefers “round table closings” – where all the parties sit together and sign paperwork. In light of the new regulations, all parties might be better off with “escrow closings”.
Escrow Closings – the seller signs all their documents at their convenience and the buyer will sign theirs. The lender is advised that all documents are executed and funding/disbursements can happen. Escrow closings are easier in 2 ways:
- All the parties can sign when it is convenient for them (still within contract dates)
- No dry closings (dry = no funds disbursed) because all the paperwork has been completed and submitted to the lender.
The downside of escrow closings is the cost. Since the title company has to manage different parties at different times- their costs increase. However to be fair the Cincinnati market has been sliding along with title companies willing to accommodate different schedules for both parties and not charging for the services.
In today’s transactions many of the contracts have the same date for closing and occupancy and considering what it costs to have a moving van parked out front for three days or pay contract penalties for not closing on time- the few extra dollars for escrow closings may save money in the long run.
Let me know what you think.
| Discussion: 2 Comments »
Both comments and pings are currently closed.
[...] View original post here: Will Government Regulations Mess Up Your Real Estate Closing? [...]
[...] sellers need to know what is happening before they sit down at the closing table. In a previous blog I covered potential closing delays caused by new government regulations added to the current [...]