The Mortgage Disclosure Improvement act was implemented to secure the borrower’s interest. Although the government has a good intention for putting up this kind of law, many lenders think that it has created more fuzz on the chaotic world of financing.
However, what is MDIA all about?
MDIA is the amendment on the Truth in Lending Act, which was enacted under the Housing and Economic Recovery Act of 2008. This aims to improve disclosure of information to borrowers and giving them an ample time to understand everything written on it. It also protects the buyers to be aware of the cost involved in getting the mortgage. This way, they will not be taken advantaged of or low-balled by the lenders.
This new ruling is effective for loans taken out July 30, 2009.
For your information, here are some of the new conditions implemented in terms of disclosure:
1. All closed-end mortgages secured by the borrower’s primary or secondary homes shall have a good faith estimate of the disclosure.
2. This statement should be clearly written on the initial Truth in Lending Act: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”
3. If the disclosed Annual Percentage Rate is erroneous, a corrected disclosure must be sent to the borrower within three business days before the loan is consummated.
4. The lender should deliver or place in mail the good faith estimates of the initial mortgage disclosure within 7 business days before the consummation of the loan.
5. If it happened that the Annual percentage rates changed by more than .125% from what was initially disclosed, the lender must provide a new disclosure. Moreover, it should be received within three business days prior to the consummation of the loan.
6. No fee shall be collected, other than the credit report fee, if the Truth in Lending Act is not yet received.
Impact on the Lending Industry
Because of the new waiting period and new ruling on the disclosure, the closing day may be delayed. Even if the borrower has received the TIL on the second day, no charges can be collected until the third day. Because base on the new ruling, it will still be deemed that the borrower has received such disclosure on the 3rd day. Moreover, it is only after that day that any charges can be made. This could mean delays in appraisals, deposits for locking rates or even processing of loan application.
It could be worse when there is a change in APR. Imagine it would add to another 3 days before closing could ever occur. It would also depend if there were holidays and Sundays in between, since they only consider business days and Saturdays to count for the waiting days.
One tip to the borrowers to avoid delays in closing is to get pre-approved or pre-qualified. It is also better if you plan ahead of time and give allowance before the closing of your loan.
Learn more about real estate by visiting these sites
Arizona Community real estate guide and
Arizona community real estate blog.
