Mortgage Updates

The Mortgage Disclosure Improvement Act goes into effect July 30^th.  How can this affect you?

The Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan (business days are every day except Sundays and Holidays). This means that before a borrower can close (Closing = Document Signing in CA) on a transaction the borrower must receive the initial Good Faith Estimate (GFE) and initial Truth In Lending (TIL) statement disclosing the final Annual Percentage Rate (APR) seven days prior to closing. In an upward moving rate environment this can play havoc with an unlocked loan and closing date. It will also necessitate locking in your interest rate sooner to avoid disclosure timing delays.

Now it is especially important to stay in close touch with your loan officer/lender. Don’t count on them to “chalk” off the days for disclosure and doc signing. You need to be proactive your self. If you need to close on the 27^th of August, your closing costs need to be hard and fast and re-disclosed no later than August 12^th. Of course, that is still 14 working days before closing. Why so far out?

Remember, in California closing for this purpose is the date docs are signed. In order for your loan to close on the 27^th, you’ll need to sign you documents by the 20^th to allow enough time for all signatures and documents to be returned to the lender’s funding department for review and ultimate funding. If there are any changes (greater than .125) in the APR, the process will start all over again. You transaction will be delayed.

This is going to be a real tight rope that lenders will be working on since the APR is affected by more than just a lender’s fees and points. Other variables are escrow fees, mortgage insurance, automatic underwriting fees, and pre paid interest and property taxes and escrow company’s document preparation fees. When locking your rate, I caution you in “under locking” your commitment. If there is a delay, and your lock requires an extension, it’s not “free”. Investors charge for keeping their funds on “hold”. Now the whole process starts over again…. Another 7 days for disclosure... before signing… and then the funding time…before closing. Isn’t it wonderful when our government get’s involved?