Friday, July 24, 2009

New Closing Date Restrictions

For loan applications taken on or after July 30, 2009, the Mortgage Disclosure Improvement Act imposes new waiting periods before closings can take place. There are many changes, but here are the things that will affect the closing date:

-- No loan can close in less than 7 business days from the time the Good Faith Estimate (GFE) and the Truth-in-Lending (TIL) disclosures are delivered to the borrower or placed in the mail by the lender.
-- The TIL that the lender gives the borrower must show the annual percentage rate (APR) within 1/8th of a percentage point, or 0.125%, of the final APR.
-- If the APR is off by more than 0.125%, then the loan cannot close until three days after a corrected GFE and TIL are given to the borrower.

What does this mean for agents? It means that your lender (whether you use a mortgage broker, a mortgage banker, or a retail lender), must know what they are doing. If they are in the habit of low-balling the GFE or lying about the interest rate, then the APR will be wrong and the loan cannot close until they correct the GFE and TIL and deliver them to the borrower. There are dozens of fees that affect the APR. If they are not shown correctly on the GFE, then your deal is not going to close.

This is a GREAT law. It is the federal government's attempt to rid the mortgage industry of crooked and inept loan officers. The government is telling us that we have to learn how to do our job, or no one gets paid. If the GFE is done correctly (and there is absolutely no reason for it to be done wrong), then your deals will close on time. If your lender does not know what they are doing, then your deals will not close on time. There will be lots of complaining by the lenders who don't know what they're doing. Any lender who already knows what they're doing doesn't have to change the way they do business at all.

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