Mortgage Disclosure Improvement Act (MDIA)

August 13th, 2009 4:09 PM

Q & A: Mortgage Disclosure Improvement Act (MDIA)

MDIA rules go in to effect for applications received on or after July 30, 2009. The new rules specify that disclosure must be delivered to a customer within three days of receipt of an application, fees (except for a credit report fee) cannot be collected from the customer until delivery has taken place, the loan transaction cannot close for a minimum of seven days after receipt of the loan application and if the APR on the loan increases by more than the TIL allowances, new disclosures must be delivered and consummation cannot occur for a minimum of three business days after delivery.

1. Disclosure have always been required within 3 business days of the loan application, so what’s different about this rule?
MIDA adds one more rule to the existing disclosure rule; the borrower cannot pay or be obligated to pay any fees (except bond fide credit report fees) until the disclosures have been delivered. MDIA has defined “delivery” as either providing the disclosures when a face-to-f ace application has been taken or mailing them. If the disclosures are mailed, it’s a phone application or an internet application, delivery is defined as 3 days after mailing. The date they were popped in the mail does not count. On the fourth day, the fee for the appraisal or any lock fees can be collected.

2. Can I collect a post dated check or collect their credit card information at the time of receiving the application and wait to run it after the waiting period?
No, the customer cannot be obligated for any fees during this waiting period.

3. Can I pay for the appraisal fee and collect it from the customer later, after the waiting period?
Yes, but remember, the customer is not obligated to reimburse you during the waiting period. So, if the appraiser completes the report in that three day waiting period and the customer cancels the transaction, you cannot legally collect the appraisal fee from the customer.

4. What if the fees and charges change during the processing of the loan?
If the APR on a fixed rate loan increases by more than .125% or .25% on an adjustable rate loan, new disclosures must be prepared and delivered to the customer. If delivery is via hand delivery (and disclosures must contain a signature and date as evidence of compliance), the customer has 3 days to evaluate the new terms before consummation (signing) can occur. If the disclosures are mailed to the customer, there is a 3 day delivery period plus the 3 day review period (total of 7 days). It will be very important to ensure you have contacted the closing agent and obtained a thorough and accurate list of all fees that will be charged to the customer to prevent delays. Remember, the date of mailing does not count.

5. Do these rules preclude a borrower from locking an interest rate?
No, the loan can still be locked but it will be imperative that every requirement under the new rules in addition to submitting a complete loan package for underwriting be adhered to.

6. Is the three day right of rescission still in effect and can it run simultaneously with the re-disclosure rules?
The right of rescission is still in effect for owner occupied refinance transactions. This 3-day period cannot run simultaneous with the re-disclosure rules. Rescission is a post consummation waiting period, MDIA adds a pre-consummation waiting period.

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