MORTGAGE DISCLOSURE IMPROVEMENT ACT New July 30 2009 Could Delay Some Closings!
MORTGAGE DISCLOSURE IMPROVEMENT ACT New July 30 2009 Could Delay Some Closings!
NEW LAW REQUIRES WAITING PERIODS AFTER LOAN TERMS COSTS OR ANNUAL PERCENTAGE RATE CHANGES!
Here at Dean’s Team Chicago our Buyer’s Agency business has been vibrant with first-time homebuyers seeking to take advantage of the Fed $8000 Income Tax Credit. Eight of our clients have already closed on their first homes thus far in 2009 – two more are scheduled to close before the November 30th deadline and several more are still looking for their first home and hope to close within the next couple of months.
But there is a new law revision that might just delay your closing due to improper disclosure by the lender. This could be a serious consideration for those closing their credit-qualifying loan just under the wire.
The changes involve the new Mortgage Disclosure Improvement Act passed last year but in effect since the end of July. In a nutshell it requires that loan processing be subject to an initial waiting period after loan terms are first provided. If these terms change re-disclosure of the revised terms would be subject to an additional three-day waiting period if the APR rate on the loan – impacted by the interest rate as well as any other loan charges – changes by 1/8% or more.
Before lenders send the initial disclosure they are prohibited from collecting Application Fees on the loan other than a nominal charge for the borrower’s credit report. Loans themselves cannot close for a minimum of seven business days after the initial disclosures are provided. (Prior to the new law lenders disclosed fees and charges early after application but often collected a fee up-front totaling as much as $1000).
If prior to closing the loan rate of interest or associated fees or closing costs change even by a small amount there is now a three-business day waiting period required before the loan can be closed.
In the past changes often were announced by fax at the closing with the pressure on high for the borrower to agree to the new terms or not close on the loan. No more! Indeed the closing can be delayed – even with buyers and sellers sitting at the closing table – if the rate fees or terms change over the threshold amount.
Can the waiting period be waived by the borrower? Yes but only for a "bona-fide emergency."
Could this lead to considerable confusion possible heartache a bit of creative games playing and hardball negotiating between buyer and seller at the closing table in order to get the loan closed on time in the event of a change?
Likely! It did for one of our closings last week.
A previously-undisclosed charge for a termite inspection – roughly $200 – was left off the closing statement inadvertently. Adding it back in would have changed the overall buyer’s cost and increased ever so slightly but over the 1/8% threshold his APR.
The Listing Agent ate the small fee in order to allow the loan to close on time.
Don’t be surprised to hear about similar work-arounds as the Tax Credit Deadline of November 30th draws closer.
DEAN MOSS & DEAN’S TEAM CHICAGO
