What is the effect of MDIA?
Mortgage disclosure improvement act has been a spin off a similar law which was enacted in July 2008. The latest version, which is specific to disclosures, came into effect on July 30th 2009. The sudden expedition of enforcement of this law, which was initially planned to be enforced on 1st October 2009, has taken all professionals by surprise. real estate agents, brokers, banks, lending institutions and even borrowers have been surprised by this move of the federal government. This law clearly specifies about the closing time lines regards a home loan.
The process for a home loan normally starts when the bank or lender sends a good faith estimate or a truth in lending to the borrower, after receipt of his application, within three working days of receiving the application. The new law, MDIA, stipulates that the bank or lender should take a minimum of seven working days to process a borrowers home loan application. Also, it clearly specifies that the disclosure that the bank shall have to submit to the borrower, should not have any differences more than 0.125% of the annual percentage rate, than as was listed in the good faith estimate. In case the bank does change the APR, then it is liable to submit a re-disclosure and can be challenged by the borrower.
The effects of this law differs, depending upon which side of the borrowing you are situated. In case you are a borrower, the times when loans used to be disbursed in ultra fast times are over. The sub prime and related regulations have ensured that banks are in no mood to expedite any process and thereby incur any sort of losses. So, the waiting period has in a way increased. You can still waive the seven day waiting period, if you have any financial emergency, and in such cases, you need to submit a written declaration, stating the exact reason for such a waiver. On the contrary, if you are banker or a lender, you need to be really careful when you submit the GFE itself. There are no scopes for change after a GFE is submitted. If you make any changes, then you will need to submit a re-disclosure.
These clauses really act as a watchdog and protect the interests of the borrower, insulating him form any increase in the annual percentage rates, after an estimate has been submitted. It also ensures that the bank cannot collect any fees upfront, unless it is included in the credit report fees. Such laws also protect the bank from taking any hasty decisions by any of their employees regards a loan application.
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