Mortgage Disclosure Improvement Act Starts Today

Further legislation to create more transparency in lending goes into effect today. Named the Disclosure Improvement Act, and part of the Housing and Economic Recovery Act (HERA), the new rules mean the days of walk-in walk-out loans are gone. While the new legistlation will act as protection for borrowers, it also has the potential to slow down closing times by up to 30 days.

David Hitchings posts an article writen by Al Hewitt explaining the new legislation:

“Recent federal legislation can impact your closing date. When completing your purchase A=agreement, even if you are prepared to move forward and close quickly, a more conservative timeframe of at least 30-45 days from the time of the contract acceptance would be a more realistic expectation at this time. Listed below is information on two pieces of legislation that stand to impact your closing date, and a few bullet points that explain the reasoning behind and effects of each measure. HERA was designed to ensure that the borrower(s) involved in the transaction are given accurate disclosure information (Truth in Lending Statement pertaining to Annual Percentage Rate or APR) regarding the loan they are applying for and adequate time to re-evaluate their decision to proceed in the event of any changes that would impact their costs to finance.”

Under the new law, any time the interest changes by a predetermined amount, new disclosures must be presented to the borrower. Other factors can also mandate re-disclosure documents. More protection for borrowers will hopefully mean less defaulting loans in the future. But the restrictions add days to a process that is already to long for some.

Click through to read David Hitchings full post.

Sign up for a free Featured Blog on Realtor.com today.