The Sky is not Falling (and why you don't need to panic about change in Mortgage Disclosure Rules)

As an agent in the Corvallis, Oregon market, I've heard some pretty strange stuff about the new MDIA which is officially in effect as of today.  There is no reason to panic! (or even complain)  There are some people (lenders and agents) that simply don't understand what it means...  What it means is that as of today, buyers will not be subject to "bait and switch" tactics that were used by some lenders in some markets.

1.   Cash sales are not impacted.  This is a lender regulation. No lender, no rule (nothing to disclose)

2.   Key provisions:

1. The lender has to provide an initial TIL (Truth-in Lending disclosure) within 3 days of recieving the loan application.  This is not a new rule.  It's been in place since the early 80's (I remember when this rule was inacted--(yes, I was in the loan business at that time) and let me tell you it's not really fun to run TILs on 1400 or so loans that are already in process)
2. The lender must deliver or mail a TIL at least 7 business days before closing; so The earliest possible closing date is 7 business days after the lender issue the initial TIL disclosure.  This is a new provision, but it's really not unreasonable, the data entry should have been done from the initial application.
3. A final, accurate TIL must always be provided at closing.  This is no change.
4. If the annual percentage rate (APR) increases more than .125% (that's an eighth of a percent), the borrower must recieve a revised TIL at least 3 business days before closing.  Closing may be delayed due to this additional 3-day waiting period.
   1. If the APR goes down, there's no reason to re-disclose
   2. An 1/8 increase sounds like a little number, but really in relation to the mathematics involved, it takes a lot of dollars to make that increase happen.
   3. Fees that play heavily into APR are lender controlled

What can trigger a change in APR?

• Change in interest rate (but if the rate goes down, so does the apr (annual percentage rate)
• An increase in the loan amount (espeically if the change results in the addition of mortgage insurance to the loan or changes the Loan-to-Value ratio (LTV) which in turn can change the pricing of the loan product.)
• A change in the type of loan
• An increase in the fees charged
• A change in LTV (appraisal could change the LTV and therefore the pricing)

What to do?  What to do? 

1. Work with a lender you can trust.
2. Plan ahead
3. Decide on a loan program in advance
4. Work with an agent that understands the lending process and can help you with the logistics of closing
5. Set realistic expectations

Bottom line, this Act helps people to make intelligent, informed decisions financing their homes and reduce the pressure of changes in loan terms at the closing table.  Change is difficult, but soon this will feel like a routine part of the process.

So, let's keep a level head.  The sky is not falling!