I wrote recently about how the "mortgage approval pendulum" has been swinging as far from the 2003-2005 position as it possibly can. This has slowed down the process considerably.
Well - it's swinging even further and it could very well slow down the process even more. 
It is called the Mortgage Disclosure Information Act and it will be effective on July 30, 2009. I'll give you some details below but for those of you who want the bottom line first - here's the deal.
There is a new time line going into effect, designed to give borrowers increased opportunity to read the Truth In Lending Disclosure (TIL) statement that your lender will send you.
The TIL statement is a document that lenders send to borrowers after the loan application is completed. It is not a mortgage commitment - it merely give you all the details of the loan that you applied for. provides you with information such as:
- APR (Annual Percentage Rate): Not to be confused with INTEREST RATE - read the difference here
- Finance Charge
- Amount Financed
- Total Payments
and some other information which you should read and ask about if you do not understand it.
The TIL statement is not new. What's new is the time line which provides a specific number of days from application to the sending of the statement and from your receipt of the statement until the earliest possible closing date
GOOD THING OR BAD THING?
I can guarantee that there will be a lot of debating on this issue. There's no question that it will in some cases impede the process. The idea of getting a quick closing is pretty much dead. On the other side, the argument is to make sure that borrowers have enough time to read, ask questions and understand exactly what they are agreeing to do when borrowing money.
For me - I'm not going to venture my opinion here. If you're a regular reader of mine, you'll know that I try not to waste time on things that are basically irrelevant. Like it or not, as of right now, these changes are going into effect in about a week. So, the most important thing is to know the rules and plan accordingly.
THE DETAILS
First of all this applies to loans for all owner-occupied dwellings. It applies to purchases and re-finances.
It will not apply to:
- Home Equity Lines of Credit
- Construction-only Loans
- Bridge Loans
- Reverse Mortgages
- Investment Properties
So for everything else here's what to expect
* The lender must mail the TIL no later than 3 business days after the loan application is completed.
* The closing may not occur until at least 7 Days after the lender mails the TIL or 3 Days after the borrower receives it. Whichever is the LATER date will be the soonest you can close.
IS THAT IT?
Not exactly. Sometimes, between a TIL being issued and the closing date, some of the closing costs may change. This can happen for a few different reasons - attorney costs, pre-paid interest amounts and a few other things.
So here's the wrinkle
Since closing costs impact the APR, it follows that if closing costs increase above the estimate, the APR will go up. Makes sense, right?
* If the APR increases by more than .125% on a fixed loan or .25% on a variable, the lender needs to issue a new TIL statement to the lender.
* If a new TIL needs to be issued, the closing cannot occur until 6 days after it is issued or 3 days after the borrower signs it.
TOO MUCH DETAIL FOR YOU?
Not trying to make your eyes blur. It isn't necessary for you to memorize the dates and details. The net effect is that that these new rules, make planning ahead more important than ever.
- Select a lender before you find a house
- Get a Pre-Approval done as early as possible
- Sit with the Lender and make sure he goes over all the critical dates with you so that you can set your expectations properly.
