Mortgage Disclosure Improvement Act - effective July 30, 2009
Mortgage Disclosure Improvement Act
Background
Mortgage Disclosure Improvement Act (MDIA) effective July 30, 2009 as published by Federal Reserve Board.
• MDIA amends the Truth in Lending Act (TIL) disclosure rules.
• Impacts early and final disclosures and the timing of fees.
Changes at a Glance • May not impose fees before borrower has received early disclosures. - Only exception is fee for credit report. • Loan may not close until after seven business days from when the borrower is provided (in hand or placed in mail) with early disclosures. • Re-disclosure required if APR is one-eighth (.125) above or below what was disclosed on TIL. Borrower must receive corrected TIL a minimum of three business days prior to closing. • Effective for applications taken on or after July 30, 2009.
How might these changes benefit borrowers? The intention is that these changes will give borrowers better information and a sufficient amount of time to understand the various aspects of the mortgage commitment they are about to undertake. The APR is a very important part of this information. That is why changes in the APR require re-disclosure. What does this mean for you, your borrowers & other professionals? All parties involved in the transaction will benefit from enhanced communication. The more information you have upfront, the smoother the process. Member FDIC Eric Baitinger Sr. Mortgage Consultant Office: 215.654.6085 Cell: 267.249.2618 Fax: 267.200.0393 www.MortgagewithEric.com eric@cornerstonefinancialmortgage.com 910 Harvest Drive • Ste 100 Blue Bell, PA 19422 This is a training tool for professional use only. ©2009 First National Bank of Chester County How can you assure a timely closing and reduce re-disclosures?
• Better plan your applications.
• Gather as much information as possible up front. This will help avoid re-disclosures and delays.
• Know your settlement agent/attorney and get costs/fees up front
- • Take more time to get borrowers in the right product early
- • Be realistic with date selection and communication • If changing rate – be aware that you will also be changing the settlement date
- - - What will cause the APR to change? • Change in the rate - due to a rate not being locked or a change in market conditions making a re-lock to a lower rate possible • Change in the amount of the loan • Change in fees - including settlement fees and costs by third parties • Change of closing date
Member FDIC
Borrower
Get pre-approved. Carefully review the TIL and ask questions early and often. Understand the consequences of locking a rate and what happens if you delay locking a rate or changing the loan program.
Real Estate Agent
Have candid discussions and realistic expectations with all parties involved. Explain that closing dates may be impacted by lack of information or changes. Provide settlement information, including any fee information to the lender as soon as possible.
Mortgage Loan Officer
Gather as much information as possible at application. Communicate with all parties and set realistic closing expectations. Explain product options fully and get customer in the right product as early as possible. Get to know the settlement company or attorney and learn all fees and costs. Make sure the loan is locked at least seven days prior to desired closing date. Reissue TIL if APR changes by one-eighth or more and allow for three business days after received prior to closing.
Settlement Agent/Attorney
Be sure that all fees/costs are accurate and communicated. Provide a preliminary HUD with all fees to lender ten business days prior to scheduled closing.
Who is responsible for communicating these changes and making sure the mortgage application and closing go smoothly and as planned?
Everyone involved in the transaction can help accomplish on-time closings and avoid delays and frustrations.
Loan Officer
Settlement Agent
Real Estate Agent
Borrower
FAQs
How many days after the final or re-disclosed TIL is sent before closing can occur?
The closing can happen three business days after the final TIL is received. An additional three business days for mailing is also required if the TIL is being sent in the mail.
What happens if a customer wants to close prior to the required number of days?
The MDIA requires the minimum number of notification days as stipulated in the Act guidelines. This is not something the Bank can change. Reasonable expectations should be communicated to the borrower. A 30 day close is a reasonable expectation
During a phone application, is it OK to collect a credit card number in advance or receive a post-dated check to cover future fees?
No. Fees may not be collected – including credit card information – until after the initial disclosure is received. An additional three business days for mailing is also required if the TIL is being sent in the mail. The credit report fee is an exception.
Is it OK to collect fees from other parties – such as appraiser or builder - before the next business day after the initial disclosures are received?
No. No fees from any party may be collected until the appropriate time has lapsed.
Is it OK to collect fees the same day during an in-person application?
Yes. When taking an application in person, you may issue the disclosure and collect the fees on the same day.
Must a new TIL re-disclosure be issued if the APR changes less than one-eighth of a percent?
No. Re-disclosures are only required for amounts more than or less than one-eighth.
What is the best way to communicate to a customer who is demanding faster turn around times?
Explain to customers that these new regulations have been put in place to ensure their complete understanding of the process and to give consumers time to make an informed decision prior to entering into a mortgage commitment. Further explain that you will do everything in your power to gather the necessary information and communicate fully so as to expedite the process within the federal guidelines.
Must all lenders adhere to these new rules?
Yes. All lenders must adhere to these government regulations.
Mortgage Disclosure Improvement
Member FDIC
This is a training tool for professional use only. ©2009 First National Bank of Chester County
