There is a new regulation implemented last July 30, 2009 called the Mortgage Disclosure Improvement Act (MDIA). The said act has affected everyone in the real estate industry. It is essential that everyone is aware of this to avoid confusion and to serve the borrowers well. The new rules set by the MDIA are to ensure protection to borrowers. This is to avoid problems incurred in the past.
To have an overview of what the MDIA is, read the list below:
1. First is the 3/7/3 rule. This is among the major changes made. The rule stipulates that a waiting period of 7 business day shall be observed before the closing of the loan. Business days are any days except Sundays and holidays. Before the closing is made, the borrower should have received the Good Faith Estimate (GFE) and the initial Truth In Lending (TIL). In addition, the APR or the Annual Percentage Rate should already be disclosed to the borrower as well.
The seven day waiting period is important because this gives the borrowers enough time to examine the estimates. Reviewing the estimates is essential in making a decision. With this, he will be able to decide if the terms are suitable for him. If he thinks that the estimate presented is too much, then he can decide to cancel the transaction. He does not have to go through it.
2. Usually, the APR is not the same with the first GFE presented. If there is more than 0.125% difference, the lender is required to re-disclose. Another three business waiting days is needed before the closing.
3. The lender should not oblige the borrower to continue the transaction. If he wishes to discontinue, then he has the right to do so. Below is a statement that should be clearly stated in the initial and final TIL.
"You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."
4. The lender is not authorized to collect any fee from the borrower such as processing fee, appraisal fee and loan application fee prior to the delivery of the TIL. The only fee they can collect is the fee for the credit report.
The borrowers can definitely benefit from the MDIA. The said act is developed to protect their interests. In the past, different practices were made to take advantage of loan applicants and borrowers. Borrowers were shock to discover fees they need to settle in the closing. Most of the fees indicated are not the same with the fees indicated in the GFE. The said rules have to be carried out properly. If not, the closing transaction will surely be delayed.
With the MDIA, all charges are being monitored and the borrowers can check them. This means that the fees that will be charged to them are the fees they prepared to pay.
You do not have to go through the transaction as well especially if the terms presented are not in your favor.
Again, keep in mind that you are not obliged to push through with the transaction just because you received the estimates and the disclosures.
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