Mortgage Regulation Change for 7/30/2009

The Mortgage Disclosure Improvement Act

On July 30th, 2009 the Mortgage Disclosure Improvement Act will become effective. The underlying initiative of the MDIA is to provide ample time for a borrower who makes a written application for a home mortgage to review a Truth In Lending Disclosure in advance of incurring any expenses, excluding reasonable credit report fees. The Truth In Lending Disclosure is better know as a TIL.

The Mortgage Disclosure Improvement Act has a major impact on the timing of the TIL that can effect the closing date of residential mortgage loans. The intention of this article is to help all parties of a purchase or refinance mortgage loan transaction understand how the MDIA can affect a closing date.

No fees, other than a credit report fee, may be paid by the consumer until after the consumer has received the initial TIL. The TIL is considered received by the consumer three business days after it has been mailed, not including the day of mailing, then the appraisal fee and any other up front fees may be collected for further processing of the loan application.

This is very important for the timing of a loan closing since an application must include income and asset verification at the time of signing a loan application for a TIL to be produced. Any delay of this information up front will likely affect the time necessary to order an appraisal to make the application complete for a timely closing.

Furthermore, if the Annual Percentage Rate (better known as the APR) should change prior to closing then a new TIL must be produced and a 3 day mail time and 3 day review time must be allotted to the consumer. Under this circumstance a closing can take place on the 7th business day from mailing. Some of the factors that could effect the APR changing from the initial TIL being issued is a consumer locking a rate after the application is made, (Example maybe the borrower changes from a loan with no points to paying points to lower the rate) any rate lock extension fees should a loan not meet the closing date anticipated at the time of the initial rate lock, and any closing agent fees that may change prior to closing.

Business days are defined as Monday through Saturday excluding federal holidays. As an example lets assume a loan application is made and a TIL is produced on a Monday. Tuesday would be day 1 of the 3 day mail time required. Friday would be the first day the appraisal and any other up front fees necessary for processing the loan application can be collected.

Here is another example and why it will be very important to consider all variables when locking a mortgage rate. The application is taken at 6PM on a Friday evening. Although we may be ale to send the application that night to the lender they are most likely not working on Saturday or Sunday to receive the application and send the TIL. The earliest the TIL would be created and sent would be Monday. Leaving 3 business days for the receipt of the TIL, the earliest possible day for ordering the appraisal would be the following Friday. One week has past since the time of application.

Star Mortgage is taking a proactive approach to the MDIA by suggesting to all consumers to make application on purchase transactions as early as possible, lock in the terms of their loan as early as possible, and requiring closing agents to provide preliminary HUD settlement statements at the time of the title order being placed by Star Mortgage that will list all their fees.

Knowing that not all transactions are alike, if all parties to a purchase or refinance transaction can understand the possible timing implications; my hope is that your loans will still continue to close as smoothly as you would expect them to.

Please feel free to call Jeff Drew at Star Mortgage at 1-800-941-5616 should you need further clarification. Thank you for your continued business.