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Why Indecision Equals Delays

Mortgage Disclosure Improvement Act Went Into Effect on July 30, 2009

Overall, there are 4 major reasons behind this law, created to protect consumers who apply for a mortgage. But most importantly, I want to share how it affects you, your sellers and your buyers.

Uniformity – Every lender must now use the SAME Good Faith Estimate. It’s easier to read and includes detailed mortgage loan terms, estimated closing costs and annual percentage rate. The term “business days” has been defined and means Monday thru Saturday, EXCEPT federal holidays.

Disclosure – If anything changes during the processing of the loan—if the loan terms change, the down payment, closing costs, APR (by more than 1/8% higher), another disclosure must be sent to the consumer.

Waiting Periods – The consumer is given “time” to review all disclosures. There is an extra layer of protection where there is a 7-day waiting period before the loan can close.

Comparison Shopping – The new Good Faith Estimate Form now includes a section called “Using The Shopping Chart”. It encourages consumers to compare loan terms, closing costs and interest rates with up to 3 other lenders.

What You Need to Know

• When negotiating the date of closing, make sure it’s flexible and there are no penalties for not closing on the specified date. The waiting periods are “federal law” and preclude the terms in the written contact.
• No last minute down payment changes
• No “floating the interest rate” until the last minute. Encourage your buyers to lock in at least 7 to 10 days before the projected close date
• No switching of lenders at the last minute. The disclosure process starts over again with another lender
• No waivers—unless it’s a hardship with tens of thousands of dollars at stake because the law is written as such that a ‘waiver” will be virtually impossible to obtain.
• Notify your loan officer if anything…and I mean ANYTHING changes on the purchase agreement. This could require a re-disclosure and delay the closing.
• Appraisal disclosure plays a part in this too. Even if all loan disclosures are met, the consumer has another 3 days to review their appraisal.
• The bottom line: The days of negotiating the deal at the last minute ARE OVER—unless your buyers and sellers are prepared to delay the closing date.