New MDIA rules will protect borrowers in many ways

I have heard some real horror stories from buyers over the years in this business. One of the most common stories is a home buyer or a person refinancing getting to the signing table, and the loan and fees are not what they expected them to be. Home owners have felt pushed into a corner. I have heard of adjustable rate loans being given instead of fixed rate loans. These are horrible and unethical practices by some very unscrupulous loan officers.

Fortunately I can say I have never put a buyer or homeowner in this position with my practices. I am in this business to earn your repeat business and hopefully referrals.

On July 30th the new Mortgage Disclosure Improvement Act (MDIA) goes into effect. There are some good points to protect the borrower. The new changes to the “Truth In Lending” (TIL) are best described in these 6 points below.

1. The 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan (business days are everyday except Sundays and Holidays). This means that before a borrower can close on a transaction the borrower must receive the initial Good Faith Estimate (GFE) and initial TIL statement disclosing the final Annual Percentage Rate (APR) seven days prior to closing.

2. If the final annual percentage rate APR is off by more than .125% from the initial GFE disclosure then the lender must re-disclose and wait yet another three business days before closing on the transaction.

3. The consumer has the right to cancel and not proceed with the transaction if they so choose.

4. Lenders are forbidden from collecting money for appraisals, loan applications, etc. prior to the delivery of the Truth In Lending (TIL). Lenders can only collect from the borrower the credit report fee at the time of prior to delivery of the final TIL. No other fees are permitted to be collected at the time of application. If the TIL is sent by mail, additional charges can occur after the 3rd business day after the borrower receives the TIL in the mail.

5. The following language must be clearly written on the initial and final TIL: "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."

6. Buyers, sellers, and real estate professionals should not schedule a closing until the borrower has completed the seven day waiting period as required in the initial TIL.

In my opinion, this is a good set of rules to protect the borrower, but it is a bit over board in some respects. The details of the loans these days can change as far as fees and costs are concerned. Mainly because many fees are directly associated to the loan amount. Where I see some frustration happening is in regards to the loan interest rate lock. This creates a timeline we need to get our file closed. If a sale price changes, or an appraisal comes in at a different value with a limited time left to react, we could have some challenges.

I do however think we will learn to accommodate and prepare for such obstacles. At least the nightmare stories I have heard of at the signing tables will become a thing of the past.

Feel free to contact me if you have any questions regarding this or other financing related topics.

Thanks. email: Bhusen@Sunsetmortgageco.com

HARP Loan-to-Value Ceiling Raised To 125%

Yesterday was a great day for homeowner with higher than current interest rates, that want to refinance, but the value of their home has suffered from current market conditions.

The Federal Housing Finance Agency (FHFA) has authorized Fannie Mae and Freddie Mac to expand the Home Affordable Refinance Program (HARP) to homeowners who are current on their mortgage payments from the present loan-to-value ratio (LTV) ceiling of 105% to 125%.

"This decision is part of our ongoing efforts to maximize the effectiveness of the Making Home Affordable program and adapt to an ever-changing housing market," says Treasury Secretary Tim Geithner.

With these expanded refinance opportunities, qualified borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will be allowed to refinance those loans according to the terms of HARP established earlier this year.

“The higher LTV refinancings will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates,” says FHFA Director James Lockhart. “The enterprises are also incenting these borrowers to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get ‘above water’ on their mortgages more quickly.”

The program provides borrowers with an incentive to reduce the term of their loan from 30 years to a shorter-term, fixed-rate mortgage and therefore pay down the principal more quickly and reduce lifetime interest payments.

Some guidline conditions do apply, so please give me a call to see if this program is a good option for you.

Email me : Bhusen@sunsetmortgageco.com

SOURCE: FHFA