Change in Our Industry

RESPA Reform, Mortgage Disclosure Improvement Act and Truth in Lending

RESPA Reform

• RESPA (1974): Designed to help simplify the mortgage shopping process and reduce consumer settlement costs.

• RESPA Reform (2009): Designed to make the process even more transparent and understandable for consumers.

It’s the It’s the LAW!LAW!

New Federal Mortgage Regulations

• The Mortgage Disclosure Improvement Act (MDIA), part of the Housing and Economic Recovery Act, affects mortgage disclosures, closing dates and fees.

• MDIA represents a major shift in the way our industry does business: All lenders (including brokers) must comply.

• It affects all closed-end loans secured by real estate.

• Compliance is required by July 30, 2009.

Expected Results

• More transparent, level and fair regulation of our industry.

• Consistent lending practices among all lenders.

• Additional controls to prevent deceptive lending practices.

• Even more consumer protection.

• Consumers that are better informed and more confident about the mortgage process.

Key Points for Associates: Fees

• As of July 30, 2009, no fees (except for a credit report fee) can be collected by the mortgage broker/originator until the initial disclosures are received by the borrower.

• If disclosures are mailed they are

considered “received” three full business days after mailing, allowing the fees to be collected on the fourth business day.

Key Points for Associates: Dates

• The earliest closing date is the 8th business day after initial disclosures are provided to the borrower.

• An increase or decrease of more than 0.125 percent in the Annual Percentage Rate (APR) from the initial Truth in Lending disclosure (TIL) requires that a revised TIL disclosure be issued to the borrower.

Key Points for Associates: Dates

• If the TIL must be revised, the borrower must receive the revision at least three business days before closing.

• Note that the TIL disclosure is considered “received” three business days after mailing.

Why Would the APR Change?

• The loan amount changes UP or DOWN.

• The loan program changes.

• Fees are higher than initially disclosed.

• Additional fees not originally disclosed must be charged.

Changes That Will Not Affect the Truth in Lending Disclosure

• Changes in the mortgage-related fees that do not change the APR by more than 0.125 percent.

• Change in fees that are not part of the APR calculation.

8/4Borrower “A” Meets with GSM

8/3Borrower “A” Rush Closing

8/12Borrow “A” Closing/Settlement

8/27Closing date for Borrower “B”

8/25Borrower “B” requests lower loan amt.

Wait 3 business days

8/28Borrower “B” New Closing date

August 2009

How Do These Changes Affect You?

• When determining closing dates, allow appropriate time for disclosures.

• Set expectations with buyers, sellers, other real estate agents and builders.

Everyone must work togetherto meet the closing date!

This applies to all new loan applications submitted on

or after July 30, 2009.

REMEMBER: