April 24, 2010
The Law Of Real Estate Transactions And Mortgage Regulation
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. It seems easier to believe things that we see in written form.
On July 30, 2009, a series of significant regulatory shifts occurred with the federal enactment of the Mortgage Disclosure Improvement Act (MDIA) and the Housing and Economic Recovery Act (HERA). Those pieces of legislation impacted both the Truth in Lending disclosures and the Good Faith Estimate provided to mortgage applicants.
Perhaps the only good thing to emerge from the new legislative scheme is the fact that home buyers are given a longer period in which to study the Truth in Lending disclosures and the Good Faith Estimate for their transaction. As is is common for borrowers to have little understanding of the actual terms of their home loan, including their interest rate, loan term, fixed or adjustable rate, and the like, the legislation does offer borrowers a full week to review their loan papers. This is not where my dispute lies. Typical buyers, a category in which I am included, did not fully comprehend the terms of their home loans when they entered into their agreements.
Should the annual percentage rate move upward or downward an eight of a percent while your loan application is pending, you will be required to allow another three days to pass prior to escrow being able to close on your transaction. Any adjustments in the fees for your title work will also result in new documents being required and a new three-day waiting period will begin. Borrowers who have failed to lock their rates run the risk of this precise situation occurring.
A new three-day period will also be triggered by any adjustment whatsoever in factors such as whether the loan has equal payment intervals or requires a balloon payment, whether it has a fixed rate or is variable, or whether mortgage insurance is required or not.
Where do such regulations originate? Has no one thought about the potential ripple effect such regulations could have on the real estate and mortgage fields? The vital importance of timing has been a constant in the world of real estate transactions. As a multitude of properties are now in the hands of banks, that concept has lost its importance.
A 3 to 7 business day delay might not seem like much when considering that the average home takes 4 to 6 months to close escrow. But the interest rate lock is generally only 30 to 45 days and title fees change often, so the new federal laws could keep home ownership just out of reach and closing dates repeatedly retreating for even longer.
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