The Housing Economic Recovery Act (HERA) implemented new regulations that will effectively lengthen necessary escrow periods. The act requires two new waiting periods that lenders currently interpret somewhat differently. Below is a summary of the way that one of our better wholesale sources interprets the new regulations.
The first waiting period prevents lenders from collecting for or ordering an appraisal until five days after a preliminary “DU Approval” is obtained. The goal of HERA is to give borrowers sufficient time to review “disclosures” before incurring an appraisal fee. This simply delays the ordering of the appraisal by several days. For example, if we learn that a borrower’s offer has been accepted today, we will immediately submit the borrower’s updated information and the address of the subject property in order to get a “Preliminary DU (computer generated) Approval”. But we will not be allowed to order the appraisal until five business days after we receive that preliminary approval.
The second waiting period is more onerous. Borrowers are not allowed to sign loan documents until the 8th business day after documents are drawn. If there is a change that requires a re-draw of documents, the 8 day waiting period starts over.
The bottom line: Escrows Will Now Take Longer.
We are implementing systems here at JVM to enable us to streamline our processes in order to once again offer 21 day and 30 day escrows, but it will take us a month or two to figure this out. For now, please request at least 45 days for Escrow Periods.
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