Back in May of 2009 there were the HVCC rules created (discussed in a previous post in this blog if you care to search for it), that caused changes in the way appraisals were ordered.
As of July 30th, 2009 there is now the Mortgage Disclosure Improvement Act (MDIA) which is an amendment to the Truth in Lending Act.
These changes now require lenders to provide consumers “early disclosure” of good faith estimates of mortgage loan costs and a minimum seven-day waiting period between disclosure and closing.
The new requirements also say that if the Annual Percentage Rate (APR) goes up or down later in the transaction by more than 1/8%, there must be an additional three business days before closing a loan transaction. This has forced lenders to scramble when a loan starts to contact the title attorney being used for the settlement, to get their exact costs. Waiting for this is time the lender could use to order the appraisal, which is always the slowest part of the process.But, MDIA says the lender cannot order the appraisal until three business days after the initial disclosures are received by the borrower.
There is very little room for error in estimating costs. This will put a lot of strain on a transaction if there is a change in costs that is out of the lender’s control that changes the APR by more than 1/8%, it will possibly cause a delay in settlement.
If you have never seen a Realtor when they are told a settlement will be delayed, trust me, it is not a pretty sight. However, everyone is negatively affected. Movers must be changed, a buyer’s work calendar gets changed around to take time off for settlement, utilities that were to be connected on a certain date must be changed to another date, etc. It is not fun for anyone when a settlement date gets changed.
Again, the Feds attempt to protect the consumer has only served to hurt the consumer. Forcing the lending industry to be more accurate in disclosing costs is a good idea, but mandating delays due to slight changes is not!