You might be impressed by this new Federal Law, if you were not involved in the mortgage financing, real estate, appraisals, or other entity or service industry which pertains to the real estate economy. Don’t we typically believe everything we read?
Altering a variety of rules with the HERA ((Housing and Economic Recovery Act of 2008) and with the MDIA (Mortgage Disclosure Improvement Act), the most recent federal law was just passed and became law on July 30, 2009. Given to the borrowers after they make application for a home loan, these two acts directly impact the Truth in Lending and Good Faith Estimates.
Though the recent addition of the Federal Laws give the borrower more time to read and review their Truth in Lending and Good Faith Estimate this is possibly the only positive aspect of the new law. The new law gives the borrower 7 days to read over the papers in case they were not familiar with the particulars of their mortgage like the Annual Percentage Rate (APR), fixed rates, variable rates and scheduled payments. Unfortunately, many borrowers are indeed uninformed when it comes to the terms of their borrowers agreement. Mortgage paperwork is often very lengthy and complicated, with complex terms and conditions that even a lawyer would have trouble understanding!
You would have to wait at least 3 business days before you could close escrow on your new house, if the Annual Percentage Rate, or APR, changed by either up or down 1/8% during the period that you are waiting on your loan approval. The 3 business day rule begins all over again if Title fees are changed, since this sets off an alteration of the mortgage documents as well. Such a scene could very easily play out for a purchaser who did not lock in their interest rate.
A new three-day period will also be triggered by any adjustment whatsoever in factors such as whether the loan has equal payment intervals or requires a balloon payment, whether it has a fixed rate or is variable, or whether mortgage insurance is required or not.
It would seem that many of these rules are instituted on a whim. It makes one wonder if anyone had put any thought at all into how these new practices could impact the housing market.` “Time is of the Essence” is a phrase known to many people in the real estate business. But today’s real estate market is largely run by banks which completely ignore this time-honored ideal.
A 3 to 7 business day delay might not seem like much when considering that the average home takes 4 to 6 months to close escrow. But the interest rate lock is generally only 30 to 45 days and title fees change often, so the new federal laws could keep home ownership just out of reach and closing dates repeatedly retreating for even longer.
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