What is MDIA?
MDIA stands for Mortgage Disclosures Information Act and was passed by Congress this year as part of the Housing and Economic Recovery Act. The purpose of the new law is to provide clear disclosures to consumers as they go through the mortgage process.
What Do the New Rules Govern?
The new rules in the Mortgage Disclosure Information Act govern:
- When fees can be collected from a borrower
- When a Good Faith Estimate (GFE) and Truth in Lending Disclosures (TIL) need to be provided to a borrower
- Defines strict regulations when lenders need to re-disclose terms and conditions
- Establishes a 7 day waiting period after final GFE/TIL are disclosed before borrower can sign final loan documents
- Determines how quickly a loan can close
The “3/7/3” Rule – Provisions of the New Regulations
- An initial GFE and TIL disclosure are required to be given to the borrower within 3 days of the loan application. The credit reporting fee is the only fee that can be collected before the borrower receives a GFE or TIL disclosure.
- Consumers must be provided the GFE/TIL 7 business days before signing final loan documents
- If the APR differs from initial or most recent disclosure by .125% then the consumer must be provided a final GFE/TIL 3 business days before signing final loan documents.
- The Home Valuation Code of Conduct (HVCC) requires consumers have a copy of their appraisal 3 business days before the close of escrow.
What Can Cause the APR to Change?
The APR can be affected by a number of things including but not limited to:
- Change in interest rate – usually happens when you lock at a different rate than the interest rate that was initially disclosed
- Change in loan amount – could happen if you decide to put more or less money down or if you get a reduction in the purchase price
- Change in loan product – say you decide to keep more money in your pocket and choose a lower down payment program, like FHA which comes with more fees. Decide which loan product you will use before you enter into a purchase contract.
- Change in lender or title fees – it is important to get an accurate quote for title and escrow fees as early as possible.
- Change in closing date – changing the closing date could change the fees paid for the loan
When Does MDIA Become Effective?
The new MDIA requirements become effective on all applications dated on or after July 30, 2009.
What Can a REALTOR® Do to Help Ensure a Timely Close?
- Understand the lender is required to wait at least 7 business days for a borrower to receive their GFE/TIL before signing final loan documents. It is crucial that buyers are genuinely pre-approved before going into contract to provide ample time for them to receive the disclosures.
- Discuss with your escrow officer of the importance of providing accurate fees and costs upfront to the lender. If fees change for any reason, it could affect the APR and require the lender to re-disclose the GFE/TIL. Re-disclosing will cause a waiting period of 3 business days before buyers will be able to sign final loan documents.
- Discuss the importance of locking their interest rate early in the process with your clients. It will no longer be an option to wait until the end of the process to lock the rate as they will then have to wait 3 business days to sign final loan documents.
- Discuss with clients that changes in the loan terms can cause delays if not completed up front.
- Set realistic expectations throughout the process for all parties involved.
- Work closely with your escrow and loan officer. When everyone works together, the new regulations should have minimal impact on your transaction.
What Can a Borrower Do to Ensure a Timely Close of Escrow?
- Plan to lock your interest rate about 10 days from when you want to sign final loan documents. Signing final loan documents usually happens 7-10 days before your scheduled close of escrow.
- Discuss all of your options with your Mortgage Advisor before you get into contract so they can provide the necessary disclosures well in advance. Seemingly small changes can trigger additional disclosure and waiting periods and could delay your closing.
What About Rush Transactions?
Rush transactions are still a possibility, just with new parameters. As long as the “3/7/3” Rule is followed, and borrowers receive their appraisal 3 business days before their transaction closes (per HVCC), rush transactions are still a possibility. We prioritize rush transactions accordingly and do everything we can to front load the required disclosures so the impact on each transaction is minimal.
Have Questions about the Mortgage Disclosure Information Act?
Send us your questions via our question page, or call us at (650) 520-0915.
Thinking of Buying a Home?
My team and I take great care to make sure your transaction is a smooth as possible. Call or email us today to set up your free, no obligation consultation and we can help you come up with a financial action plan for success.
Other Posts You May Enjoy
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- Can I Use Tax Credit Money for a Down Payment?
- San Mateo Mortgage Shopping Guide
- Paying Points for Your San Mateo County Mortgage
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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