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Learn about the Updates in the Truth in Lending Act, the HOEPA and the MDIA of 2008

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By : marco benavides    99 or more times read
The Federal Reserve conclude amendments to the Truth in Lending Act of 1968 in May of 2008, and some of the provisions took effect in July of 2009 through the Mortgage Disclosure Improvement Act. The amendments were enacted so that anyone looking to get a mortgage loan would be well-informed about fees, costs and mortgage rates, among others, before signing the agreement.

Regulations that were already in place were too flexible, even though lenders were already required to provide disclosure as to the fees and costs involved with a mortgage loan. Some lenders would not provide disclosure until the day before closing, and some would do so on closing day, which had the effect of pressuring and coaxing borrowers into accepting higher terms, costs, and fees than what had been agreed upon.

Oftentimes, the mortgage loan borrower was already packed and waiting to move into the new home, having sold the old one. With no other recourse because walking away was no longer an option, borrowers would end up accepting much more onerous fees and terms.

Through the new amendments, lenders are required to provide an initial GFE, Good Faith Estimate, with all of the fees that the buyer and seller are going to be responsible for on closing day. This initial GFE is to be given to the applicant three business days from the time the mortgage loan application was completed.

Once initial disclosure is provided, closing cannot be done on the mortgage loan for seven business days. This allows the borrower plenty of time to decide whether to accept the terms quoted on the GFE. Furthermore, the lender is prohibited from collecting any advance fees, with the single exception credit report fees, which the lender must pay to the credit reporting agencies.

It is especially important to note that a variation of more than .125% on the APR or more than .250% on an ARM calls for re-disclosure, and a waiting period of three more business days. This was put in place in order to protect consumers from the practice of receiving one percentage rate quote from a loan officer, and then a much higher figure at the closing table.

However, this waiting period could have a negative effect if the borrower has an emergency situation which requires a quick closing. If this is the case, the MDIA recognizes that these unusual situations may arise, and it calls for a borrower to provide a waiver in writing, and to sign and date it.

If a waiver is done, it cannot be done by way of a form letter provided by the lender. On the other hand, the emergency contingency is not clearly defined in the MDIA, which makes it a bit flexible at to the reasons why it can be used.

Borrowers should be aware that they may walk away from negotiations at any time and for whatever reason. Filling out a mortgage loan application with a lender does not place any burden on a borrower to get a loan from that specific lender or from any lender for that matter.
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