Mortgage Disclosure Improvement Act
Feeling the blues after hearing about the Mortgage Disclosure Improvement Act? (MDIA) For those that haven't heard, this act is part of the Reinvestment & Recovery Act of 2009.
The MDIA became effective on July 30th, 2009. Here are a few highlights of the act that could delay real estate closings in the near future.
- The borrower must receive a good faith estimate and a truth in lending disclosure within 3 days of a mortgage application. (but this had already been in place by RESPA laws a long time ago)
- The earliest a transaction can close is 7 days after the initial dis-closers have been issued by the lender. This is assuming that no re-disclosures are needed.
- There has to be final disclosures sent if : if the APR is more or less than 0.125% of the original disclosures and or if the loan terms have changed. This has to happen after 3 days have passed prior to the closing date.
Sounds like time is of the essence and that we all need to be on the same page. Gerry Suarez wrote about the MDIA - What the Mortgage Disclosure Improvement Act will mean to our industry. Gerry gives us his opinion as a mortgage banker and a mortgage broker.
What kills me about all of this is that this is nothing new. Re-disclosing took place and could be done at the closing table or the day prior, as long as it was done. The key point, if it was done. Many of us have heard those horror stories of rates, fees, and points changing last minute. But that the borrower didn't find out until they were at the settlement table. In reality, they had a leg to stand on and could have stopped or held up the closing proceedings.
The long and short of it, this could possibly interrupt closings/settlements if these changes aren't made 3 days prior to closing. These delays could cost many more money, in which case, the reason for this Act is to prevent this.
So what might be so tricky about this? Could there be any confusion on the part of the lender? Keeping this in mind, re-disclosures have to occur if the APR changes by more than 0.125% or if the loan terms change, right? The confusion for many could be what are considered to be APR changes. - Annual Percentage Rate - Regulation Z is part of the TIL, Truth in Lending, and it states what charges are part of the APR, but at the same time, gives a list of items that don't have to be included. I have written why I think the APR is misleading to begin with.- Why is the Annual Percentage Rate (APR) so confusing? -
Here is where we all need to come together as one team now, more than ever, in order to not cost anyone else extra money while trying to close. In many cases, the realtor chooses the title company/escrow company. Why do I bring this up? You better be working with an excellent title company, one that I don't have to follow up with for days, trying to get a preliminary HUD 1. This is very critical because some title fees are also part of the APR. Here is a list of them.
-- Escrow/Closing Agent/Closing Attorney Fee
-- Prepaid items - this is to include property taxes
-- Wire Transfer Fee
-- Courier Fee
Summary : Overall, we all need to be aware of these changes, not just the mortgage company. Because here is one more issue. The only monies that can be collected prior or at time of application is the credit report fee. The appraisal fee can't be collected until 3 days after the initial disclosures are given. Yes, this could delay ordering appraisals also. As a loan officer with a mortgage company, I will need the help of the title company and sometimes the realtor. We need to work as a team.
Important Message -
Keep in mind that if a mistake is caught 2 days prior to closing, that it will need to be re-disclosed and couldn't settle until the 4th day. This is where not only costs could build up because of moving expenses, but because the interest per diem would need to be changed also. This is the interest that you pay daily, the daily interest, which is added into the costs. And keeping in mind that we need the correct and exact tax bill information. Any last minute changes, again, will delay the closing.
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc