I suppose if you were not in the real estate, mortgage financing, appraisals or any other service or entity that deals with the real estate economy, you would be impressed with this new Federal Law. Is it not the case that if you read it in print, in must be true?
On July 30, 2009, a series of significant regulatory shifts occurred with the federal enactment of the Mortgage Disclosure Improvement Act (MDIA) and the Housing and Economic Recovery Act (HERA). Borrowers are given a Truth in Lending and Good Faith Estimate when applying for financing for a home loan, this document will be changed by the passing of the new laws.
That it offers a buyer or borrower additional time to review their Good Faith Estimate and Truth In Lending brochure turns out to be the only positive in this new Federal 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. Most buyers including myself had somewhat vague understandings when signing all these mortgage documents.
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. If Title fees change this also triggers a change to these mortgage documents and the 3-business day process starts all over. If the buyer does not “lock” their interest rate this scenario could very well happen.
The waiting period begins again, if the loan type changes from “Fixed” and “Balloon”, “Fixed” and “ARM,” a conventional loan including Mortgage Insurance and a conventional loan that does not include Mortgage insurance, or the type of “ARM” (Interest to Amortized, 3/1 ARM to a 5/1 ARM).
It would seem that many of these rules are instituted on a whim. Does anyone consider the domino effect or possible consequences these new laws might have on the housing industry? “Time is of the Essence” always remained the most critical saying in real estate. Since most banks have taken over many homes on the market, this phrase has been totally abused.
With escrow closings currently taking anywhere from four months and upward , some may think there really is no harm in tacking on an additional few days. This new law will doubtless interfere with the closing date of the purchaser’s new home, as the greatest challenge lies with title fees constantly changing while interest rate locks are typically only available for 30 or 45 days.
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