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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.

Is it not the case that if you read it in print, in must be true?

The latest federal law that was recently passed and became effective on July 30, 2009 changed some rules with the MDIA (Mortgage Disclosure Improvement Act) and the HERA (Housing and Economic Recovery Act of 2008).

These two Acts directly affect the Truth in Lending and Good Faith Estimate which are given to borrowers when they apply for a home loan.

The only positive to this new Federal Law is it provides a borrower (buyer) more time to review their Truth in Lending and Good Faith Estimate. 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. Oh, I won't argue this. Mortgage paperwork is often very lengthy and complicated, with complex terms and conditions that even a lawyer would have trouble understanding! One issue that makes things more complicated is if the Annual Percentage Rate either increases or decreases by 1/8% while the loan approval is still pending, you will have to delay a minimum of 3 business days before you can close the escrow on your home.

There will be another 3 business day delay if the Title fees change during this time. Borrowers who have failed to lock their rates run the risk of this precise situation occurring.

If the type of loan changes from “Fixed” and “Balloon”, “Fixed” and “ARM” ,the type of “ARM” (Interest to Amortized, 3/1 ARM to a 5/1 ARM) or a conventional loan with Mortgage Insurance and conventional loan without Mortgage Insurance, the waiting period starts all over.

It would seem that many of these rules are instituted on a whim. Does anyone consider the domino effect or possible consequences these new laws might have on the housing industry? “Time is of the Essence” always remained the most critical saying in real estate. Since most banks have taken over many homes on the market, this phrase has been totally abused. With escrow closings currently taking anywhere from four months and upward , some may think there really is no harm in tacking on an additional few days. 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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