A change will do you good??




The world is changed. I feel it in the water.  I feel it in the earth. I smell it in the air. Much that once was is lost, for none now live who remember it.  It did not begin with the forging of the Great Rings, but with the creation of subprime loans and 100% financing.

Galadriel, chill out, not all change is bad!

Galadriel, relax! Not all change is bad.

Change can be a good thing, but going through the process of change may not be too pleasant. This is a timely reminder because on July 30, 2009, the Mortgage Disclosure Improvement Act (MDIA) goes into affect. This changes the way in which borrowers are disclosed information regarding their loan AND the time frame in which a loan can close (based on the disclosure of that information).

Some examples of the new guidelines:

  • Lenders will no longer be allowed to collect any application fees, appraisal fees, etc. until the borrower receives the truth-in-lending statement.
  • “Received” is when the borrower signs and dates the disclosure OR three business days after loan disclosures have been mailed to the borrower.
  • During the loan process, if the APR on the loan changes by more than 0.125% for any reason, the borrower must receive an updated set of disclosures and given time to review them.
  • On a redisclosure, a home closing cannot occur until 3 business days after the lender sends the updated disclosures to the borrower.
  • Redisclosure is required even when the borrower’s APR goes down (better rate, lower closing costs, etc).

The idea behind MDIA is great because it is designed to protect consumers. It will cut down on predatory lending and ensure borrowers know about any changes taking place on their loan. The days of shady lenders saying at the closing table “by the way, your rate is actually 5.5%, not 5%. Now sign here” are over.

The downside in all of this will be MDIA’s implementation. There may be delays in ordering appraisals (waiting to collect up-front fees), and possible delays in closings for changes in loan amounts, rate, closing costs, etc.

As we all adjust to the new guidelines, here are some practical steps to ensure a smooth closing.

  • Plan ahead: Always a good idea, but now even more important to close on time.
  • Schedule closings wisely: Quick closings will become very difficult under the new Act. Before putting down a quick closing date on a contract, call me so we can schedule a realistic closing date.
  • Be patient: As with any change, there will be an adjustment period. Remember, this is not only new for borrowers and mortgage professionals, but also for realtors, appraisers, and closing attorneys.

As cumbersome as these changes may be, it is actually a good thing. There will be some frustration involved as we all adjust to the new guidelines. That said, it will be worth the trouble in order to provide more transparency and protection for borrowers.



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