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There are some requirements in the mortgage and lending industry that buyers and sellers need to be aware of as it may impact close of escrow dates.
This information is from Amy Swaney of Peoples Mortgage.
As a part of the Housing and Economic Recovery Act of 2008 (HERA – The law that did away with Seller-Funded Down Payment Assistance) there were significant changes made to the Truth-in-Lending Act. These changes were called the Mortgage Disclosure Improvement Act (MDIA) of 2008. The application of these changes began yesterday, July 30, 2009.
WHAT ARE THE CHANGES?
Much like a recession period on a refinance, MDIA requires that a borrower must be given a certain amount of time to review the ACCURATE fees and program that has been disclosed to them before they can close on ANY loan transaction. These are FEDERAL changes, thus all lenders (bank or broker) must comply.
There are 4 specific areas where the change will affect the close of escrow date on a loan transaction.
1. Closing MAY NOT OCCUR until 7 business days after the initial disclosures (loan application and Truth-in-Lending (TIL) Disclosure) are sent to the borrower. Business days include Monday through Saturday and exclude Sundays and federal holidays.
Examples of how this may affect your client
§ If your client changes lenders, the loan cannot close for a minimum of 7 business days.
§ Your borrower is totally prepared and thus gets a contract accepted based upon a RUSH closing. The closing MAY NOT OCCUR prior to 7 business days of initial disclosures.
2. Any change in the Annual Percentage Rate (APR) by more than 0.125% requires the Truth-in-Lending Disclosure to be revised and delivered to the borrower 3 business days before the loan can sign. For example, if the loan amount is $100,000, any change in fees over $125 would change the APR by .125%. The 3 day waiting period cannot start before the disclosure is delivered.
The delivered date is determined by the method of delivery, if TIL is delivered by…
Face to Face the TIL is considered delivered the same day.
Email or FAX the TIL is considered delivered the next day.
Mail the TIL is considered delivered in 3 days.
*Please Note: Changes to certain title fees can trigger the re-disclosure requirement especially on bank owned transactions!
Examples of how this may affect your client
§ At initial application the borrower is given a Good Faith and TIL before a property is found. Once a property is found, the sales price is different thus the origination fee is different, a new disclosure is required and signing cannot occur for a minimum of 3 business days.
§ The initial disclosure shows a 5.5% interest rate but when a property is found the borrower decides not to lock in the interest rate. The interest rates drop to 5.25% and borrower decides to lock in, a new TIL must be delivered and signing cannot occur for a minimum of 3 business days.
§ The revised TIL is delivered to borrower when loan is locked. Repairs are required on the appraisal and the seller takes 30 days to complete and your client’s lock is about to expire which will require a lock extension fee. A new TIL will be required to be delivered and signing cannot occur for a minimum of 3 business days.
3. The Good Faith Estimate and TIL disclosure must be re-disclosed and delivered to the borrower 3 days prior to signing when…
§ The loan program changes between a Fixed and Balloon
§ The loan program changes between a Fixed and ARM
§ The loan program changes between types of ARMs (i.e. 3/1 to 5/1, interest only to amortized)
§ The loan program changes between conventional with MI and conventional without MI
§ The loan program changes between conventional and government
§ The loan program changes between FHA and VA
4. Upfront fees for appraisal CANNOT be collected until the initial disclosures are delivered to the borrower.
These changes are important to understand as a very small mistake can create a delay in the COE. Obviously the borrower’s choice of what lender to use will become even more important as changes will also create more delays! Please let me know if you have specific questions.
If you have additional questions Amy can be reached via email .
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