Mortgage Disclosure Improvement Act (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.
The MDIA will broaden the category of application which requires
early disclosure of mortgage applications which will result in the
securitization of a consumers dwelling (including second and vacation
homes) and applies to purchase transactions, refinances and assumptions.
The language in the disclosure has been modified to include a notice
to the consumer that they are not required to complete the loan
agreement merely because they have received the disclosure or signed
a loan application.
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.
Highlights of MIDA's new requirements include the following:
- TILA disclosures apply to any closed-end extension of credit
secured by the dwelling of a consumer including non-principal
dwellings (second homes).
- There must be a seven-day waiting period between the date
the initial TIL disclosure is provided to the consumer and disbursement
of the loan.
- Any change to the initial APR disclosed in the original
TIL that exceeds 1/8% (.125) for a regular transaction or 1/4%
(.25) for an irregular transaction will require a new TIL disclosure
with an additional three-day waiting period between its receipt
by the consumer and disbursement of the loan.
- The waiting periods will not include Sundays or any nationally
recognized federal holidays.
- No fees, other than a bona fide credit report fee can be
charged prior to the initial TIL disclosure being provided to
the consumer.
Initial Truth-In-Lending (TIL) Disclosure:
Under the new rule, estimated disclosures must be given no later
than three business days after receipt of application for any consumer
purpose mortgage and should include a Good Faith Estimate of Settlement
Charges (GFE), Truth-in-Lending disclosure as well as a Servicing
Transfer Disclosure.
Waiting Periods:
The revised rule prohibits creditors, mortgage brokers, and any
other person from imposing any fee other than a bona fide and reasonable
credit report fee until the consumer has received the initial disclosures.
If delivered by regular mail, the disclosures are considered received
3 business days after they are mailed. Additionally, the loan cannot
close (document signing) until 7 business days after the initial
TIL disclosure has been mailed.
If the APR at consummation increases by more than 0.125% from the
previously disclosed APR, a re-disclosure TIL must be given. The
loan cannot close (document signing) until 3 business days after
the re-disclosure TIL is received by the borrower.
The business day definition for the purpose of waiting periods is
the same as the definition used for rescission, Monday-Saturday
excluding legal public holidays.
Waiver of Seven and Three-Day Waiting Periods:
Both the seven-day and three-day waiting periods regarding TIL Statement
disclosure can be shortened or waived if the extension of credit
is necessary to meet a bona fide financial emergency. If re-disclosure
of the TIL Statement is again out of tolerance subsequent to this
waiver, the waiver is no longer effective. In order to request this
waiver, a pre-printed form cannot be used. The consumer must prepare
a dated written statement, signed by each consumer that will be
legally obligated and entitled to receive the TIL Statement (including
conveyance of homestead rights), detailing the specific emergency
and specifies that request for waiver of the waiting period.
This waiver should follow regulatory requirements for waiving rescissions
rights and waiving a waiting period prior to consummation of a high
cost loan under HOEPA.
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