WILL THE NEW MORTGAGE DISCLOSURE ACT CHANGE YOUR CLOSING TIMES?

This news just in courtesy of one of our trusted lenders, Aaron Gordon at Bank of America: In an effort to provide consumer protection and transparency when the buyer gets a mortgage, the Government has made law changes to mortgage loan processing and disclosures that take affect on July 30, 2009. Referred to as the MORTGAGE DISCLOSURE IMPROVEMENT ACT OF 2009, it is part of the Government’s commitment to making sure borrowers completely understand the terms and conditions of their mortgages and are given ample time to review what they are agreeing to.

If you are a homebuyer, here is what you need to know about it.

These changes will affect the processing times of loans. By being proactive and understanding the new Act, your closing dates should still occur in the usual 30 to 45 day timeframes that it takes for a transaction to complete, thereby minimizing the added stress of delayed closings.

Initial disclosures must be provided to an applicant within three days of loan application. No fees can be collected during this three-day waiting period, except for a reasonable credit report fee.

When a borrower makes an application, the lender will present them with initial disclosures. The disclosure package includes the Good Faith Estimate, Truth in Lending disclosure, and other legal forms as required by law.

The lender will not be able to collect any fees for appraisals until the borrower has had at least three days after getting the disclosures for review. This means that the appraisal report cannot be ordered until after the three-day waiting period after initial disclosures.
The borrower must get these disclosures again at least seven business days before he signs his loan documents. If he doesn’t, the closing will be delayed until he does get them and the seven-day period for review has passed.

The borrower must be provided a copy of his appraisal a minimum of three days prior to his loan closing. If he doesn’t, your closing will be delayed until he does get a copy and the three-day window for review has passed.

Any increases in fees that result in an APR change of 0.125% of the loan amount require re-disclosure. The borrower must then get his new disclosures and wait at least three days for review to close. Once again, this is being done to make sure the borrower has time to review what he is getting and be comfortable with it.

What if there are “surprise” costs at closing time? When that happens now, if the numbers are too far off from what was disclosed, he will have to leave the closing table, get new disclosures, get time to review, and will be unable to return for three days.

The only exception to this will be if it’s an emergency, such as if the home will be foreclosed on.

Also, keep in mind that if you change lenders in the middle of the process, the new lender will have to start the disclosure process once again. Changing lenders in the middle of the transaction could result in lengthy extensions.

Many borrowers today are often too busy to come to the office to make the application. These borrowers do it conveniently by phone or online. In these cases, the disclosures are mailed to them. As a result, the timeframes and wait period will be slightly longer.
Most lenders are estimating these changes could add three to 10 days to your closing times. Please plan accordingly.

So, let’s say you want to close as quickly as possible. What can you do to be proactive and make sure the closing time is fast as possible?

1. Make the application with your lender in person.
2. Get a fully executed, clearly legible copy of the purchase agreement as soon as it’s available from the lender.
3. Be ready to pay for the appraisal when asked.
4. Prepare and be ready to submit all requested documentation (pay stubs, W2’s, bank statements, etc.) within a day or two of application.
5. Carefully review the disclosure package and notify your lender of any corrections immediately.
6. Lock your loan at the time of application or early in the transaction.
7. Choose a credible, reputable, ethical lender you can trust to honor the rates and fees they disclose. Surprises at the closing table will result in lengthy delays.
8. Choose a lender whom you have confidence in. Changing lenders while in escrow will result in a lot of these disclosure clocks starting over.
   

If you do all of the above, there is no reason that your 30 to 45 day closing times should be affected by this Act.

It’s important to understand that this Act has been put in place so the buyer has sufficient time to make good, sound, responsible decisions about his loan. It is not meant to delay the process but rather, when taken into consideration, should justify that the loan is for his best interest. If you need straightforward real estate advice or a referral to any of our trusted lenders, please contact The Dulcie Crawford Group at 702-285-1990.