Starting July 30th, 2009, the Mortgage Disclosure Improvement Act (MDIA) amendments to the Truth in Lending Act (TIL) — also known as Regulation Z — take effect. These regulations, passed by our swell friends in congress as part of the Housing and Economic Recovery Act, are designed to allow homebuyers adequate time to review specific information related to their loan. Changes include:
- Initial TIL disclosure. A seven-business-day waiting period is now required between the delivery of initial disclosures and the signing of closing documents. This will eliminate the possibility of closing in less than seven business days unless the borrower faces a bona fide personal financial emergency.
- Up-front fee collection. Up-front fees cannot be charged until after the borrower receives the initial disclosures. If disclosures are mailed, the fee is charged the fourth business day after mailing. If disclosures are hand-delivered, the fee is charged the same day.
- Redisclosed TIL. If the interest rate or fees change, causing the APR to increase by more than 0.125% then a revised TIL must be sent to the borrower so that the customer receives it no fewer than three business days prior to closing. Each time the TIL is redisclosed, the waiting period starts over and could affect the original closing date. If the rate is in float status, a redisclosed TIL will not be provided each time there is an APR increase. Redisclosure should be sent, if needed, eight business days before the estimated closing date.
Thanks Congress! This is just another awesome way you are looking out for the consumer. Really, and I mean that. In all seriousness, though, it really is an attempt to by congress to look our for the borrower, given that so many cried dumb during this mortgage crisis. Additonally, it aims to help protect many borrowers who can’t qualify for conventional loans, and are getting ripped by the high points and fees game of private money mortgage lending. (Predatory lending practices).
Heres the Skinny
Enough jibba-jabba! What does this mean to the Seller/Buyer? More time on the transaction if you are not careful, and potential transaction killers if this is messed up. Realtors and lenders will need to be diligent in understanding the changes, so that they can be accounted for during the offer and acceptance process. Lenders must be acutely aware of the timelines as well. There must be additonal coordination between the realtor, lender and escrow to ensure that all final TIL numbers are within a .125% (1/8) prior to issuance of docs or closing. Otherewise, the TIL must be redisclosed (ouch) and another six day waiting period will begin. (Yikes).
As a buyer or seller, you need to understand that the Realtor and the Lender must be tightly integrated (hah, tech jargon at last) during the entire process. Rate fluctation and specific timelines must be closely monitored and communicated, for the consequences of a redisclosure could potentially shoot down a deal. Ask your Realtor TODAY about the new federal regulations, and take the time to understand how they can affect you.
Filed under: Buyer's Blog, Realtor Trends, Seller's Blog, MIDA, Regulation Z, TIL, Truth in Lending
Joe Capote 