MDIA – Mortgage Disclosure Improvement Act – is supposed to improve the transparency of mortgage loan disclosures to the consumer – You! Well, to say the least, it hasn’t. I will give you the latest story of yet another victim of this new policy and follow that with the true time lines that us mortgage guys/gals are supposed to follow.
Time is what it’s all about – giving the customer time frames to accept, review and understand exactly what they are getting into – a mortgage. My client Kate new exactly what she was getting – a FHA loan with 3.5% down on a beautiful condo in Los Angeles. Her offer was accepted over several others from a combination of superior qualifications, a decent over-list offer and a great loan package by yours truly. We submitted the loan to a FHA lender that sells their loans to one of the main institutions. No biggie, right? Wrong. Selling to the big guns can have its disadvantages – if one thing is out of sync that loan will not be purchased by the big guy and the smaller lender will have to hang on to it, ultimately clogging up their portfolio. More on the secondary market later.
One of the time frames that we have to abide by with MDIA is waiting a certain amount of days (in this case 4) to collect fees for an appraisal after the lender has disclosed their loan documents (Truth In Lending, Good Faith Estimate, etc.). We did just that. We ordered the appraisal on September 25, 2009, 4 days after lender disclosed. All was good, the appraisal went well, came in at purchase price. Several weeks later as we prepared to send out the final loan documents, a condition came on to the file from the lender asking for a canceled check or credit card receipt of the appraisal fee. This is to demonstrate that we remained in compliance with MDIA time frames by not collecting any fees until after the disclosures from the lender had been accepted and reviewed by the client.
Can you guess the date of when Kate wrote the check for the appraisal fee? That’s right. September 24, 2009. One day prior to the date it was allowed. Kate sent the check by mail so it would arrive by the 25th unbeknown to me. She was unaware that a check written a day before would be a big deal. The check wasn’t even cashed until the 30th of September. The invoice on the appraisal clearly indicated the fee was accepted on the 29th.
Loan dead, lender rejected it. There was no way to work around it. Non-compliance was the reason. I now call this the Mortgage Disclosure Insanity Act. I thought this was supposed to help the consumer, not completely disrupt and cancel a loan.
Although we did everything correct, followed the ordering procedure to a “T”, remained in compliance on all aspects, had the appraisal fee cashed several days after the allowed date – the lender still determined it was out of compliance.
The great news is, we have a lender that accepted the loan and has followed all procedures and will close the loan in 1 week. Kate will get her beautiful condo in Los Angeles without any additional expense or troubles, other than some extra time within the loan process.
We remained professional, focused on the solution and not the problem; therefore, we have another highly satisfied client.
I’m curious to hear your experience with MDIA or know of one that you’d like to share in the comments below.
MDIA and New Compliance Requirements
The following compliance requirements regarding how and when the TIL must be disclosed have been in affect for all loans since July 30, 2009:
- TILA disclosures now apply to any closed-end extension of credit secured by the dwelling of a consumer. This now includes non-principal dwellings. So basically it requires compliance on all 2nd homes and investments properties.
- There must be a seven (7) business-day waiting period between the date the initial TIL disclosure is provided to the consumer and the closing/signing date of the loan.
- There must be a three (3) business-day waiting period between the date a re-disclosed/final TIL is received by the consumer and the closing/signing date of the loan. If the APR at closing/signing varies by more than 0.125% from the most recent TIL provided to the borrower, the borrower must be in receipt of a new re-disclosed/final TIL at least three (3) business-days prior to closing/signing.
- No fees, other than a bona fide credit report fee, can be charged prior to the initial TIL disclosure being received by the consumer.
- Both the initial and re-disclosed/final TIL disclosures shall contain the following statement.
“You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”
- You can deliver via email, fax, mail, or in person. The standard receipt times are as follows:
- Face to Face – Same Day
- Email/Fax – Same Day
- USPS First Class Mail – 3 Days
- Overnight Mail – Date of tracking receipt
These are the times that you need a professional to guide you through the turbulent waters. We all want smooth sailing. Who is the next person you know who is looking to buy or refinance property in California?
{ 2 comments… read them below or add one }
Does MDIA apply to direct lenders and banks also.
The author of http://www.jonasloans.com has written an excellent article. You have made your point and there is not much to argue about. It is like the following universal truth that you can not argue with: Universal Truths are not necessarily consecutively numbered Thanks for the info.
{ 1 trackback }