Equipment and Construction News

The new Federal Law may, at first, appear beneficial to those not familiar with the subjects of mortgage financing, real estate, appraisals or other services concerning the managing of real estate. Is it not the case that if you read it in print, in must be true?

The latest federal law that was recently passed and became effective on July 30, 2009 changed some rules with the MDIA (Mortgage Disclosure Improvement Act) and the HERA (Housing and Economic Recovery Act of 2008). These two Acts directly affect the Truth in Lending and Good Faith Estimate which are given to borrowers when they apply for a home loan.

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.

One issue that makes things more complicated is if the Annual Percentage Rate either increases or decreases by 1/8% while the loan approval is still pending, you will have to delay a minimum of 3 business days before you can close the escrow on your home. There will be another 3 business day delay if the Title fees change during this time. Borrowers who have failed to lock their rates run the risk of this precise situation occurring.

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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