The Significance of the Mortgage Disclosure Information Act (MDIA): How it Will Affect You

by benborden

What is the MDIA or Mortgage Disclosure Information Act?

The Mortgage Disclosure Information Act or MDIA was passed into law when Congress enacted the Housing and Economic Recovery Act becoming effective July 30, 2009. The MDIA, seeks to ensure that consumer’s receive cost disclosures earlier in the mortgage process to create transparency during the loan process. It is important to understand the significance of this law and the affect it can have on your loan closings. Bear in mind, this rule only applies to primary residences and vacation / second home transactions and the interpretation will vary among lenders who will error on the side of caution.

What Changes Do the New Rules Bring?

The MDIA only allows a “reasonable” credit report fee to be collected before the customer receives the Good Faith Estimate (GFE) and Truth in Lending (TIL). The customer must receive both the GFE and the TIL within 3 days of application. Once the borrower has received and signed the initial Truth in Lending Disclosure, the loan officer can then order the appraisal. The MDIA has established the following schedule to be used to determine when it is permissible to accept fees:

Disclosures mailed to borrowers —- on the 4th business day after mailing
Disclosures e-mailed to borrowers —- on the day actual receipt is confirmed
Disclosures are provided in person —- on the day of receipt

There is a 7 day mandatory waiting period after receiving the final Good Faith Estimate and Truth in Lending before signing final loan documents. If, throughout the loan process, the fees and charges change more than 10%, the APR by .125% or a change in loan terms there is a mandatory 3 day wait plus the mandatory wait time based on the manor the re disclosure took place. Its important to note, that this means ANY fees added after the initial disclosure has been made, not just lender.

What Makes the APR change?

Fees - Changes in lender or title fees
Interest Rate - Locking a rate other than what was disclosed on the application or an extension in rate lock time period
Loan Amount - Putting more or less money down; Reduction in purchase price
Type of Loan - Deciding to put less money down, changing to an FHA or VA which can have more fees associated.

What Can a REALTOR® & Lender do to Help Ensure Timely Close?

First it’s important for everyone to be on the same page to understand that the loan process will take longer. It’s crucial that the buyer is genuinely pre-approved prior to entering into the contract. Its imperative that a dialogue takes place in the beginning with the chosen title representative to accurately reflect their fees. Its important for loan officers to lock the loan early in the process, don’t gamble the interest rate. Going forward its important to manage your customers expectations. Also, its going to be important to schedule your loan closings 45 days out and initially even 60 days while lenders get used to these new processes as we are only 3 weeks into it and the first loans are approaching closing.

If something does come up at the end it’s important to note, that no re disclosure is necessary if the lender, broker, Realtor or seller pay whatever fee was added. The final rule also allows consumers to expedite consummation to meet a bona fide personal financial emergency.

Be ready, more regulations coming down the pike as well. New RESPA regulations that were published November 17, 2008 and are scheduled to take full effect on January 1, 2010.

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