Understanding MDIA (Mortgage Disclosure Improvement Act)

The MDIA or the Mortgage Disclosure Improvement Act is a new regulation that took effect last July 30, 2009. This affects all the real estate professionals. This is why all of them have to be aware of its provisions. There are several new rulings that make it beneficial for borrowers. It has also provided a clear direction as to what the lenders can and cannot do.

Here are few of the rules set by the MDIA:

1. The 3/7/3 rule is among the major rulings of the MDIA. This rule stipulates that there should be a seven business day waiting period before the home loan is closed. Here, the business day is defined as any day except holidays and Sundays. This further means that before any closing of the transaction, the Good Faith Estimate or the (GFE) and the Initial Truth lending (TIL) statement has to be given to the borrower and the Annual Percentage Rate (APR) has to be disclosed during the said waiting period.

You may ask what makes the seven day waiting period important? This is very important because with the said time, you will be able to review all the disclosures given to you. This assures you that the loan you are getting is the actual loan you need. If you realized that some of the fees are too expensive for your budget, the lender can re-disclose or you can cancel the transaction.

2. In most cases, the APR is different from the initial GFE. If the difference is more than .125%, the lender has the responsibility to re-disclose. A waiting period of three business days is required before the
closing.

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3. The borrower should not be obliged to continue the transaction. He should be able to cancel it if that is what he wants. The statement written below should also be indicated in the TIL, both the initial and the final.

"You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."

4. The lender is also forbidden to collect any amount for loan processes like loan applications and appraisals, except for the credit report fee, before the TIL is delivered. The applicant should receive the final TIL first before any amount is collected.

The MDIA is truly beneficial for the borrowers. This way, they are certain that their interests are protected. This is brought about by practices before that left the borrowers surprise during the closing. It is essential that these new steps are taken seriously and followed. If not, closing will surely be delayed.

If you are a borrower, you will notice that the steps regulate all the fees charged to you. This ensures that you do not have to pay a huge amount just to get your loan approved. This also strengthens your right to cancel the transaction especially if the terms are not favorable to you. As mentioned earlier, you are not bound to continue the transaction just because you received the disclosures and the estimates.

The real estate professionals are not the only people who should know about the MDIA. In fact, it is vital that borrowers and buyers know this as well to ensure that they benefit from it.

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