Author: Michael Brown
Phone: 615-370-8634 ext. 137
Email: michael.brown@churchillmortgage.com

In today’s market, there are an increased number of hurdles that must be cleared to obtain a home loan.  Mortgage lenders are saying they must do twice the paperwork in order to close a loan.  As a Loan Officer, I can verify this is true and customers need to be aware.  

Recent changes to the Truth in Lending Act http://edocket.access.gpo.gov/2009/E9-11567.htm  took effect last month, requiring lenders to provide certain disclosures about mortgage fees.   There is no doubt this will help borrowers make more informed loan choices, but I believe this new requirement could create further delays in an already slow lending process.  

What’s the same:

Current regulations require a the Lender to disclose in writing all loan terms within 3 days of taking the initial loan application.

What’s new:

Before a new loan can close, the law requires a seven business day waiting period once the initial disclosures are provided to the customer.   If the interest rate (APR) changes by more than .125% (higher or lower) during the loan process, the Lender must re-disclose and wait another three business days before the loan can close.   This could be costly when considering rate lock expirations.    Delaying a purchase transaction with multiple parties involved adds another layer of stress and frustration to the transaction.  

A Recent Example:

A recent loan closing for one of my customers was delayed when the night prior to closing, it was discovered that we actually disclosed a higher rate at the beginning of the process.   During the process, I was able to take advantage of a lower rate option.   As an advocate for my customers, I had the best intentions in mind but because of this new regulation, the closing was delayed.   Who would ever think that lowering a customer’s rate would cause such drama?  

The closing was put on hold and we had to wait an additional three days before the loan could close.   This caused additional stress for the borrower since he was under a deadline to get the funds from this refinance transaction.   This is the part of the new regulation that makes no sense.

Overall, I agree with these changes.   I firmly believe in protecting the customer and making sure the terms of the loan are crystal clear.   We have put processes in place to prevent these closing delays going forward but Buyers, Sellers, Realtors beware – I believe this is probably the beginning of more changes to come.