The government made some changes to the Landing Act which came into effect in July 2009. These changes will help borrowers to get more information about loan. This Act requires lenders to provide certain disclosures about the mortgage fees. This will give borrowers an idea as how the deal would look like. Now borrowers have more information about their loan choices. But some experts say that this could delay the lending process which is already slow.
The regulations mandate a three-day review period for the loan documents before the loan process can begin in earnest. But the important point is that, if interest rate changes even marginally before the settlement date, a new set of disclosure documents must be given to borrowers, restarting the review process.
Before the law came into practice, lenders could begin the loan-underwriting process on the day they took an application. They could do this by changing borrower’s fees to pay property appraisers. But now, they must wait three days.
When foreclosure crisis came into picture, it was revealed that many borrowers had little idea how much their mortgage could cost them in a given month. So the government felt that there should be some provisions in laws so that a borrower could get enough time to read and grasp the terms of their loan documents. That’s why Congress enacted new laws.
According to the lenders, settling the typical mortgage on a new purchase takes about 45 days — at least two weeks longer than last year, before underwriting rules were severely tightened.
Now, borrowers can lock in interest rates for as long as 60 days, and if they run into trouble, they may extend the “rate lock,” as it is known, for up to three weeks (down from four weeks a year ago). The cost of each further one-week rate-lock extension, however, is one-quarter of a percentage point of the loan size.
If the annual percentage rate on the loan changes by at least an eighth of a percentage point, another mandatory three-day waiting period can be wedged into the latter part of the mortgage process.
Change in the interest rate can be seen by the borrower from the initially quoted rate for many reasons. If their credit score was lower than they first thought, or if they are required to pay mortgage insurance on the loan because their down payment money ran low, for instance, the rate can easily rise by more than one-eighth of a point.
Also, if a borrower’s settlement date is suddenly in jeopardy, he or she can apply for an emergency waiver of the three-day waiting period.
