Mortgage Disclosures Improvement Act (MDIA) and how it affects YOU, the Realtor

As you’re probably aware, the Mortgage Industry is in a constant state of change. You have the ever-tightening qualification parameters which differ with every Lender, making it tough to qualify even the most “golden” borrowers. Then you have the recently implemented HVCC ruling, which has increased the appraisal fees for the consumer, decreased the quality of the appraisals and as you may have already witnessed first-hand, killed many sales. As if all this weren’t enough, we’re now blessed with yet another obstacle in closing loans quickly and easily for our clients: the Mortgage Disclosures Improvement Act (MDIA), effective July 30, 2009. Now, don’t get us wrong, we’re all for protection of the consumer, which is the primary goal of MDIA. However, with so many people and facets already affecting the timely completion of every real estate transaction, the timelines set forth by the MDIA add yet another element to the juggling act of closing the deal. Now some of you may be wondering “this is about MORTGAGE disclosures, what does this have to do with me?” The timelines we Mortgage folk must now adhere to will affect how quickly we are able (or more accurately, ALLOWED) to close a loan. That means no matter how well the client qualifies for the loan, and how timely all parties are in completing the required documentation, we will all now be forced to twiddle our thumbs during the waiting periods set forth by the MDIA. Let me explain: Certain stages of the loan process have been given a specified waiting period after the Delivery Date. The Delivery Date is the date the item is received by the client. The Delivery Date is determined by the Delivery Method used. Acceptable Delivery Methods are:

• Face-To-Face: We meet with the client Monday, who signs and dates the loan package right there, including the key disclosures Truth-in-Lending and Good Faith Estimate (TIL/GFE). Delivery Date = Monday
• Email Delivery: We email the TIL/GFE to the client on Monday. Tuesday, we receive a read receipt from the client. Delivery Date = Tuesday
• Overnight Mail: We overnight TIL/GFE to the client Monday, and confirm it was signed for Tuesday. Delivery Date = Tuesday
• Regular Mail: We send TIL/GFE via postal service to the client Monday. Delivery Date = Thursday

The following waiting periods now apply:

• Initial TIL/GFE: Close of escrow cannot occur prior to 7 business days after Delivery Date of TIL/GFE
• Collection of Fees: No fees (other than for the Credit Report) may be collected before the Delivery Date. Therefore, we cannot order an Appraisal with the client’s credit card until the Delivery Date.
• Appraisal Receipt: The client must have a copy of the appraisal for 3 business days after Delivery Date of the Appraisal before escrow can close.
• Changes to APR: Any change in APR of >.125% (from rate or program changes, changes in initially disclosed fees, change in closing date, etc.) must result in the generation of a new TIL/GFE to the client. Close of escrow cannot occur prior to 3 business days after Delivery Date of the redisclosed TIL/GFE.

To sum it all up, a client must have the following in their hands before escrow can close:

*** Initial TIL/GFE for 7 business days *** Appraisal for 3 business days *** Redisclosed TIL/GFE (due to any changes in APR of >.125%) for 3 business days.

So my Realtor friends, please keep these new timeframes in mind when collaborating with your clients on the projected close of escrow date. We of course will do everything possible on our end to prevent any delays in the loan process, but please remember that with the constant changes in available rates and programs, along with clients who don’t always produce needed documentation in a timely manner, changes in APR are a good possibility. It’s very important to our team here at Falcon Financial to work closely with you & your clients and remain in constant contact to do what it takes to create a smooth and timely transaction.

Tom Smith

Owner/Consultant