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Federal Mortgage Disclosure Improvement Act (MDIA) goes into effect on 8/1/09

By Adrian Cox

Mortgage and Lending with Loan Protector Insurance Services

July 30, 2009 08:07 AM

The Federal Mortgage Disclosure Improvement Act (MDIA) goes into effect on 8/1/09. This new Act applies to all applications dated 8/1/09 forward. The easiest way to understand the concept of MDIA is to think of it this way. Purchase loan borrowers now have the same protection as a refinance borrower, meaning the Act basically creates a rescission period of 3 days for purchase loans.

What is happening here is the Federal Government is making sure purchase borrowers cannot get "jammed at the table" with new fees and feel forced to close. The borrower now has 3 days to understand any fee changes before they close, just like the 3 day rescission period for refinances. This new Act is designed to ensure that the consumer is aware of the fees and will eliminate the practices of unethical Lenders that under disclose the closing fees in hopes of getting the deal.

You may consider standardizing your Admin fees on your real estate transactions. Often, the admin. fees change from deal to deal and are not charged on all cases. I don't always know what your fees are, or if they are being charged, until we receive a preliminary HUD-1 from the Title Company. This could be a potential problem that would cause a settlement to be delayed. It is imperative that we disclose these fees up-front so there will be no settlement delays. There is no way around this. This is a Federal Law. I will be asking about the Realtor Admin. fees on all deals referred by my Realtors going forward. This way we will not have to delay settlements. Please call me with any questions, and I look forward to working with you to ensure a smooth, stress-free transaction.

Here are some of the particulars that pertain to your real estate transactions.

If there are ANY changes (changes that trigger re-disclosure are below) made to the initial GFE and TIL that cost the borrower more money than what was originally disclosed, then I must re-disclose a new GFE and TIL, have these signed by the borrower, and then the loan MUST wait 3 DAYS to close.

Here are the changes that trigger the new Act:

-Origination Fees

-Loan Discount Fees

-Appraisal Fees

-Appraisal Re-Inspection Fees

-Credit Report Fees

-Flood Cert. Fees

-Tax Service Fees

-Commitment Fees

-Processing Fees

-Underwriting Fees

-Transfer and Recordation Fees (Stamps as well)

-Realtor Admin. Fees (charged to the borrower) **********(See comments above)

Thanks for your time.

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Anonymous

JT Kaelin, SRES

BAD NEWS FOR REAL ESTATE AGENTS...

OH it may look good for the seller or buyer but for the agents that worked so hard to get everything to settle, we have to WAIT 3 DAYS MORE to get paid. How about a law to require lenders to advance the boker fees at ratified contract. Any fee would be a HUD 1 additional line listing for the buyer or seller. What do you think about that?

Jul 31, 2009 01:37 AM

#23

Anonymous

Jeff

The initial waiting period is 7 days (use the same days you'd use to caculate the rescission period Sundays and holidays don't count), if you have any changes that cause APR to adjust .125 or greater (up or down) then you must redisclose and wait 3 days. There is also an initial 72 hour period that prohibits a lender from charging a client fee's with the exception of the credit report.

I agree with what many of the realtors stated above, it is more important than ever to work with a reliable mortgage professional. We have had to undergo training and have implemented new software to meet the highest standards.

Jul 31, 2009 01:50 AM

#24

Anonymous

Nick Capuano

Good point Joan. Further on that, unless a buyer has a walk right in the event that the lender's fees, etc. change, this doesn't provide any real help or protection to a buyer. Even with a walk right (which is, we all know, next to non-existent), it doesn't really help the buyer(s), especially if they have sold/are selling their current house - they need a place to live. What's the buyer going to do? Say: "For the extra $200, $300, even $1,000 in extra charges, I'm going to walk away from this house...and my deposit?" 3 days or 7 days doesn't really do anything unless the buyer can find another lender in 3 or 7 days to fund (which is not a viable option, especially in this market; and who's to say the new lender doesn't change its fees?). This is a paper shield ostensibly enacted for the protection of buyers by elected officials who feel they need to "do something," when in reality, it doesn't do much of anything. This is far different than a re-finance situation, because in a re-fi, the owner can simply say "I'm not closing."

Jul 31, 2009 01:57 AM

#25

Jane Heiss-Armitage

Ayre/Rhinehart Realtors (Midland County, Bay County,Saginaw County, Mi.) - Midland, MI

Selling Homes in the Great Lakes Bay Region

Hi All, I think the wait for 3 days more to get paid is silly, my question is who will be making interest on our money while it isn't in our pockets ? Just a thought !

Jul 31, 2009 02:00 AM

Kristeen Smith

First Portland Mortgage Corp - Portland, ME

Maine Mortgage Specialist

There is not only a three day wait time at the end if there are any fee changes, there is also a three day wait time in the beginning if the consumer happens to not meet you face to face or doesn't have e-mail. Disclosures must be verified to have been received by borrower before any fees can be collected up front, thus delaying things like appraisal ordering and rate locking. If the borrower agrees to receive these by e-mail or can sign disclosures face to face, then fees can be collected up front and there is no delay.

In any case the new rule, with the extra time requirements of 3+7+3 (business days) will be hard to sawllow. Add this to the HVCC rules. I can see many consumers will be extremely stressed out and upset during the mortgaging process no matter how good the loan officer is.

Jul 31, 2009 02:06 AM

Brenda Probasco

RE/Max Premiere Properties - Lawrenceville, NJ

My concern is for the Buyers and Sellers downstream from this transacation. Shouls someone need the $$ from this closing to take to the next one, what happens? 3 Days with your life left packed on a moving truck? What if there are 3 closings in sucession...it's a lovely domino effect for our clients.

Jul 31, 2009 02:12 AM

Joe Pryor

The Virtual Real Estate Team - Oklahoma City, OK

REALTOR® - Oklahoma Investment Properties

This is a change I can live with. Not all changes designed for fairness and transparency work, but this seems like a no-brainer.

Jul 31, 2009 02:45 AM

Dan Magstadt

Paramount Residential Mortgage Group, Inc - Lake City, FL

It's going to be interesting to see how these new changes affect our industry...

Jul 31, 2009 02:47 AM

Anonymous

Russ

It really shouldn't be a big deal. The only instances I can see where this is going to be a problem is:

1) if you stuff fees on borrowers at the last minute

2) the borrower is floating, locks at a rate higher rate than initial disclosed, and then wants to close immediately. This could be a issue with 15 day rate locks which offer the best pricing. Might not be able to get a refi closed and funded in time with the 3 day waiting period, then a 3 day right of recission on refinances.

3) Emergency situation. Big Box internet lender with phone officers botch deal and then you REaltor calls up Super Star Local loan officer to save the day. In some cases, we have closed loans in one day saving someone's behind. Can't do that anymore. It will be at least 3 days before the deal could close from the time of application.

The reality is that with all these changes between HVCC, disclosure rules, and stricter underwriting guidelines. Realtors should be expecting 60 day closings instead of the the 30-45 days it takes now.

Jul 31, 2009 02:57 AM

#31

Janet Guilbault

Platinum Home Mortgage Company - Walnut Creek, CA

San Francisco Bay Area Direct Mortgage Lender

Will cause loan officers to be much more exact about their GFE. Will place a new focus on closing costs (long term). Will delay closings at the last minute.

Jul 31, 2009 03:03 AM

Janet Lyness

First Mortgage Lenders - Knoxville, TN

It's easy to get uptight about the additional 3 days on the front and possibly more days on the back if re disclosures are needed. It adds additional days to loan closing and if you have a 30 day contract you need an extension. But...we all knew it was coming so....I am prepared, are you?

Remember this was put in place to protect the borrower/buyer so even if we as the professionals aren't happy we have no choice but to deal with it and do what we can to prevent any additional time front or back. Will your lender email the disclosures to the borrower? We work with lenders who have agreed to do this and it will shorten the time from 3 business days to 1 if the email address is good. Will wait and see if this works. God bless all of us who believe this is still the profession we want to be in! I for one wouldn't change my career choice.

Jul 31, 2009 03:08 AM

Marlene Berrier

RE/MAX Pueblo West - Pueblo West, CO

I love this new protection! Too many times, even my reputable lenders, have not given the settlement statement to the Borrower until the closing time, even though I am jumping up and down asking for the fgiures so that I can discuss them with my Buyer BEFOREthe closing so that if there are any problems with any "fees" the borrower can ask about them and not delay closing. I think this is great protection-and as a professional, it is ok for me to wait for my check as I want my Borrower to be happy with their loan since I am usually the one to refer them to a lender. Thanks for the article as it was informative!

Marlene Berrier

Broker/Owner

Jul 31, 2009 03:14 AM

Gene Riemenschneider

Home Point Real Estate - Brentwood, CA

Turning Houses into Homes

Generally I think it is good, but I am worried about delayed closings. We are always under pressure to close.

Jul 31, 2009 03:50 AM

David Baker

HALO Capital - Des Moines, IA

It is important to pay attention to the fact that this requires a TIL to be redisclosed to the borrowers prior to closing only IF there is a change in the APR at closing. This will not get your settlement statement to the borrower for final figures any sooner. I suggest that you leave time in your contracts for potential delays as this new regulation in conjunction with the recent HVCC nightmares certainly can stretch things out a bit.

Jul 31, 2009 05:22 AM

Jeani Codrey

RE/MAX Corridor - New Braunfels, TX

Director of Opportunity & Agent Development

The scary thing about all this is the thousands of agents out there who are not plugged into the industry and have no clue about the impact this will have and how they need to educate their clients...it is going to make nightmares out of transactions for co-brokes who work with them! I am glad for the consumer protections, but I hope we are not tanking a bunch of closings when people don't do what they are supposed to. Let's park and watch!

Jul 31, 2009 06:19 AM

Heather Leach

The Knowledge Coop - Vancouver, WA

There are a few different versions listed above. Boy isn't this fun! This shouldn't cause and issue or any additional paperwork. This law is simply another way to enforce what is already a required re-discloser per REG Z by instituting a waiting period in transactions where the lender has not done so in a timely manner.

Here is a link to some info on what goes into calculating the apr: http://kb.calyxsupport.com/kb/article.php?id=415

Here is one directly from the Federal Reserve website. Page 10 shows a chart of how to determine what items should be included inthe APR calculation. http://www.federalreserve.gov/boarddocs/caletters/2008/0805/08-05_attachment1.pdf

APR should include interest collected at closing, mortgage insurance and all prepaid finance charges which are charges that a buyer pays at the time of closing and would not pay if they were paying cash for their purchase.

Timeline for redisclosure waiting period varies depending on the method of delivery. If the redisclosures are delivered in person or via email (only with a previously signed E-Sign Act Consumer Disclosure) the transaction will require a 3 day period from the time of the 'accurate' (within .125% APR of the APR listed on the final closing TIL) disclosure before funding is permitted. For redisclosures made by other methods (including fax) there is an additional 3 day waiting period to allow for delivery to the buyer before their 3 day review period begins. Meaning that a total of 6 days from the day the redisclosres are sent to the buyers is instituted.

Jul 31, 2009 06:29 AM

Kerry Jenkins

Prime Properties - Crestline, CA

One of my mortgage guys told me to startwriting contracts for 50-60 days for escrow on everything due to this new rule. There was also something new as far as the investor in all loans getting a 7 day time period to review the entire loan package, and not being able to order an appraisal until after this is done, so possibly another 2 week wait? Got to love our federal government doing what's best for our business, cause they all all are real estate licensed and they know how it runs.

Oh, and then i woke up...

Jul 31, 2009 08:01 AM

Anonymous

Adrian, thanks for sharing as I was not up on this. It would seem, however, that, ideally, closings should still remain unaffected if brokers and lenders are doing their jobs correctly.

Jul 31, 2009 08:17 AM

#40

Anonymous

Debbe

What about the daily per diem charges on REO properties that don't close on time due to this new ruling- This could cause a lot of problems, unless the banks who own the properties are willing to have some kind of grace period for this situation.Just my 2 cents

Jul 31, 2009 10:17 AM

#41

Esko Kiuru

Bethesda, MD

Adrian,

Generally these new rules are good, but will likely push closing further along. The key now is to clearly communicate the potential for delays to the borrower.

Jul 31, 2009 11:28 AM

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