While the government tries to improve consumer protection for buyers and people refinancing their mortgages, they also raise the cost and aggravation for everyone involved in the transaction. Realtors should anticipate higher costs on everyone's good faith estimate to offset the misguided way the government is trying to protect buyers from unscrupulous brokers and lenders. Their intent is great, the execution not so good.
The new rules under the Mortgage Disclosure Improvement Act (MDIA) go into effect July 30th. Among other things, these rules require a minimum 3 business day waiting period to sign documents after the truth in lending Annual Percentage Rate (APR) is within .125% tolerance (for a fixed rate loan) to the TIL provided at closing. Additionally, if you are a mortgage broker, no fees other than the credit report fees, may be collected (or even the credit card information obtained) until 3 business days after the lender provides their TIL to the borrower. In practice this means the appraisal will generally not be ordered right away. On a purchase we often did not order the appraisal until after the inspection period anyway. We did not want to spend any of the buyers money until we were sure they were going ahead with the purchase. In those situations, it may not make a difference. But if you have a rush, it will be a problem. One of our lenders noted that we could not even "lay out the money for the borrower" if we wanted to.
In order to avoid the possibility of being out of tolerance between the original truth in lending statement and the final one, most brokers and lenders will aim high on their APR costs (such as processing fees, underwriting fees, prepaid interest, flood cert, courier, escrow fees, and certain other title charges) so that they can either be equal to or lower than the final HUD. This will at least make it look like costs are higher to the buyer and Realtor up front. It provides less valuable information to both parties because in many cases it will be less accurate. If the rate is not locked, expect to see a little bit higher rate on there as well so we build in a little cushion to keep the APR in tolerance.
There may be changes as the rule is implemented, so stay tuned.
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