Mortgage Disclosure Improvement Act of 2008 (MDIA)

 On July 30, 2009, some of the provisions in the final rule for revisions to the Truth-in-Lending Act (TILA) become effective. The requirements that become effective for all loan applications received on or after July 30, 2009 are detailed below. These requirements are not applicable to Home Equity Lines of Credit. Additionally, MDIA requires additional language for adjustable-rate loans; however, this provision is still forthcoming by the Federal Reserve.

 Application of the TILA Requirements – TILA disclosure requirements will apply to any closed-end extension of credit secured by real estate regardless of occupancy.

 Initial Fee Restrictions – MDIA amends TILA to require that a consumer receive the early disclosures BEFORE paying any fee to the creditor or other person in connection with the application, except for a fee to obtain a credit report.  If a fee to obtain a credit report is imposed, the fee must be bona fide and reasonable in amount.   The MDIA also provides that when the early disclosures are mailed, the consumer is deemed to receive the disclosures three business days after they are mailed.

 The commentary added by the MDIA rule provides that if the early disclosures are delivered in person to the consumer, a fee (other than a credit report fee) may be imposed any time after delivery, and that if the disclosures are placed in the mail a fee (other than a credit report fee) may be imposed after the consumer actually receives the disclosures or, in all cases after midnight on the third business day following the mailing. An example is if early disclosures are mailed on a Tuesday, assuming there are no legal or public holidays, a fee (other than a credit report fee) may be imposed after midnight on Friday.

 No Requirement to Complete Statement – Early Truth-in-Lending (TIL) disclosures and subsequent disclosures must contain a clear notice stating “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application”.    Please confirm with your LOS provider that your TIL disclosure will include this new statement.  You likely will need to have the most recent version of the LOS software to provide a compliant disclosure.  For Calyx Point users you will need version 7.0 installed to provide a compliant disclosure, all earlier versions will not be compliant and the loan can not be processed.

 Seven Business Days Prior to Closing – MDIA requires a seven business day waiting period prior to closing from delivery or mailing of the TIL statement to the consumer. The timing begins when the creditor mails or otherwise delivers the TIL statement to the consumer.  It is not based on receipt date or assumed receipt date by the consumer but rather mailing or delivery by the creditor.  If we are not provided documentation to show the mailing or delivery date we will assume the date the borrower signs the disclosure is the delivery date and the closing can be no earlier than 7 business days from the later of: the date the document was created, or the date the document was executed by the borrower.

 Three Business Days Prior to Closing – Currently creditors are allowed to re-disclose the TIL statement to a consumer at closing when the APR is out of tolerance (i.e. the final APR exceeds the initial APR by more than 0.125%). MDIA now changes this to a three business day time period prior to closing.  This means that if the final TIL APR exceeds the initial TIL APR by more than 0.125% the borrower must be re-disclosed with a new TIL at the correct APR and the settlement can occur no sooner than three business days after the borrower is re-disclosed.  

 The business day definition for the purpose of the waiting periods is the same as the definition used for rescission, Monday-Saturday excluding legal public holidays.  

 USA Funding will be tracking all TILA forms for compliance with the new verbiage, delivery dates and APR tolerances.  For TIL’s that must be re-disclosed because the APR has increased by more than 0.125%,  USA Funding will be responsible for delivering the required revised TIL statement to the borrower and unless otherwise directed the document will be mailed to the consumer.

FHA Underwriting Guideline Changes
Effective for loans locked on or after July 17, 2009 the following FHA guideline changes will apply:

Properties currently listed for sale are not eligible for FHA refinances, whether fully qualifying rate/term, streamline or cash out.  Properties previously listed and then canceled, are eligible for refinance with the following restrictions:

·        Refinances, including fully qualified rate/term and streamline, maximum LTV will be allowed.

·        Cash Out transactions will be restricted to 70% LTV if the listing was canceled within six months preceding the application date.

In the case where a property was listed previously and evidence of cancellation is in the underwriting file the borrower must provide a signed/dated written statement of their intent to continue to occupy the subject property as their primary residence and a reasonable explanation for removing the home from the market.

 Loans locked prior to July 17, 2009 under previous guidelines will be honored until lock expiration and can be extended under our current extension policy as needed.

Please contact us with any questions regarding these loan application changes, www.minocquamortgage.com or marcia@minocquamortgage.com