Calling all realtors - Closing Issues & Time is of the Essence... - The MDIA issue (Mortgage Disclosure Improvement Act)

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Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

Mortgage Disclosure Improvement Act

 

feeling the mortgage blues?

Feeling the blues after hearing about the Mortgage Disclosure Improvement Act? (MDIA)  For those that haven't heard, this act is part of the Reinvestment & Recovery Act of 2009.

The MDIA became effective on July 30th, 2009. Here are a few highlights of the act that could delay real estate closings in the near future.

  • The borrower must receive a good faith estimate and a truth in lending disclosure within 3 days of a mortgage application. (but this had already been in place by RESPA laws a long time ago)
  • The earliest a transaction can close is 7 days after the initial dis-closers have been issued by the lender. This is assuming that no re-disclosures are needed.
  • There has to be final disclosures sent if : if the APR is more or less than 0.125% of the original disclosures and or if the loan terms have changed. This has to happen after 3 days have passed prior to the closing date.

 

 

 

 

time could run out & cost borrowers money

Sounds like time is of the essence and that we all need to be on the same page.  Gerry Suarez wrote about the MDIA - What the Mortgage Disclosure Improvement Act will mean to our industry. Gerry gives us his opinion as a mortgage banker and a mortgage broker.

What kills me about all of this is that this is nothing new. Re-disclosing took place and could be done at the closing table or the day prior, as long as it was done. The key point, if it was done. Many of us have heard those horror stories of rates, fees, and points changing last minute. But that the borrower didn't find out until they were at the settlement table. In reality, they had a leg to stand on and could have stopped or held up the closing proceedings.

The long and short of it, this could possibly interrupt closings/settlements if these changes aren't made 3 days prior to closing. These delays could cost many more money, in which case, the reason for this Act is to prevent this.

 

 

 

So what might be so tricky about this?  Could there be any confusion on the part of the lender? Keeping this in mind, re-disclosures have to occur if the APR changes by more than 0.125% or if the loan terms change, right? The confusion for many could be what are considered to be APR changes. - Annual Percentage Rate - Regulation Z is part of the TIL, Truth in Lending, and it states what charges are part of the APR, but at the same time, gives a list of items that don't have to be included. I have written why I think the APR is misleading to begin with.- Why is the Annual Percentage Rate (APR) so confusing? -

 

 

 

team work

 

Here is where we all need to come together as one team now, more than ever, in order to not cost anyone else extra money while trying to close. In many cases, the realtor chooses the title company/escrow company. Why do I bring this up?  You better be working with an excellent title company, one that I don't have to follow up with for days, trying to get a preliminary HUD 1. This is very critical because some title fees are also part of the APR. Here is a list of them.

 -- Escrow/Closing Agent/Closing Attorney Fee

 -- Prepaid items - this is to include property taxes

 -- Wire Transfer Fee

 -- Courier Fee

 

 

 

 

Summary : Overall, we all need to be aware of these changes, not just the mortgage company.  Because here is one more issue. The only monies that can be collected prior or at time of application is the credit report fee. The appraisal fee can't be collected until 3 days after the initial disclosures are given. Yes, this could delay ordering appraisals also. As a loan officer with a mortgage company, I will need the help of the title company and sometimes the realtor. We need to work as a team.

 

 

 

 

Important Message -

Keep in mind that if a mistake is caught 2 days prior to closing, that it will need to be re-disclosed and couldn't settle until the 4th day. This is where not only costs could build up because of moving expenses, but because the interest per diem would need to be changed also. This is the interest that you pay daily, the daily interest, which is added into the costs. And keeping in mind that we need the correct and exact tax bill information. Any last minute changes, again, will delay the closing.

 

 

 

 

 

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Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Roland Woodworth 08/14/2009 11:18 PM
Topic:
Lending / Financial
Location:
New Jersey Bergen County Fairlawn
Groups:
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Realtors®
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Tags:
mdia
mortgage disclosure improvement act
mortgage disclosures
good faith estimates
truth in lending
truthing in lending disclosures
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
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I'll get back to everyone else's comments.. I just wanted to address Lisette, comment # 31 & 32.  thanks

 

LISETTE... . never heard of this before. I know of loans that have been denied by lack of borrowers response, when asked for paper work.

In regards to being reinstated?  I am assuming that you mean that the lender would re-open your file again?  Sure, but a new application would need to be started... unless they threw out the denial letter.  Question, what state are you in?  Is this a purchase or a refinance?  I can also be reached at jbelonger@ihmci.com   thanks, jeff

 

August 15, 2009 11:14 AM #33
Rainmaker
72,936
Larry Morris
HomeServices Lending - Newberg, OR
Larry Morris, NMLS 150073

Jeff - Good post. What is becoming more and more evident is that the "Estimate" is being taken out of the Good Faith Estimate. It is becoming more and more crucial that we have accurate GFE's. THis means calling Title companies and getting their actual "estimated" fees rather then going off a chart, or guessing. Combined with HVCC it means using actual lender fees rather hen average fees. But more then anything, it means staying on top of the process and getting revised GFE's out ASAP.

Effectively, the 30 day close is a pipe dream for many purchases with HVCC and now this.

I suppose that we can cover ourselves by sending out a "High" GFE 1 week before closing and then come in looking good...

A problem yet again is that the LO who is honest and provides an accurate GFE will still lose out to the slim ball LO who makes the initial GFE look good and changes it 4 days prior to signing.

This doesn't really fix anything.

August 15, 2009 12:00 PM #34
Rainmaker
189,903
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

I do not understand why you wrote all this anyways.  There is nothing new in the rules that any good loan officer was not already doing.  As a loan officer and a real estate agent, the new regulations do not force me to make any changes to what I have been doing for years.  Perhaps it will stop some of the slimball lenders out ther from some of the unscrupulous practices they have been engaged in, but I sort of doubt it in most cases.

August 15, 2009 01:02 PM #35
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Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

It all makes sense, but all too often it does NOT happen. We have one closing company in the area I rarely go to (but must when a buyer chooses them) because they do  NOT Provide a HUD1 to review until you're at the table!

August 15, 2009 02:08 PM #36
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
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DARIN..... . I agree, because I have had some realtors chose their title company in the past and I did the major follow up myself..  either requesting the CPL, or the title... or asking for the preliminary HUD, etc,etc...  I don't think some realtors realize this, even when I let them know.  thanks for the polite compliments and kind words.

CHRIS.... . you kind of lost me on your first sentence. And I loved your second sentence.. "The more things change the more they remain the same.  This industry is in the blender on high speed these days.".. funny, yet so true.  thanks

CHRISTINE... . yes, more hoops to jump through... and now more than ever, that we must work with each other and not against each other.  Each realtor that I am dealing with, I will send this to them.

TOM.... . hell, even lawyers would get this mixed up... lol  But yes, it is 3 full business days. Saturdays count also.  And as I mentioned, maybe he just got the first part of it mixed up, with the 7 day issue.  thanks

ROLAND.... . I believe it will and it think about this..  I just thought about this and will add it now. If it delays one purchase, that is a train... meaning that there are 4 other purchases tied to this, it could kill a few or make many a lot more expensive...  rut row.. and thanks for the complimentt.

 

August 15, 2009 02:13 PM #37
Rainer
169,250
David J. Stiles
Waynesville, NC

As a buyer's attorney I review the Good Faith Estimate (GFE) prior to my clients executing the contract of sale. The GFE, being a federal 1 size fits all form, does not give a realistic estimate of the closing costs in NY.  Mortgage officers rarely calculate title insurance properly.  They generally underestimate recording charges. They generally underestimate miscellaneous charges for items like muncipal, bankruptcy and Patriot Act searches. They rarely include  the cost of a survey.  Some include 1 day of per diem interest, most 15 days, and small percentage include 30 days.  Most mortgage officers default to 6 months tax escrows and ignore that there are pre-paid taxes that will be refunded to the seller. They forget to include a recording charge for POA on a condo purchase. The list goes on.

Some mortgage officers want to see my GFE after I have advised my clients that their closing costs are $2,000 to $5,000 higher than the GFE.  These mortgage officers want to know what the range for certain expenses are so they can prepare a more accurate GFE.  Other mortgage officers could care less and take the attitude they don't have to disclose that expense (i.e. their responsiblity is done if they disclose a mortgage title premium because, after all, fee title insurance is optional).

There seems to me numerous interpretations on what has to be included on a GFE.  Am I wrong in my opinion that mortgage officers better start including every possible expense on the GFE?  I am going to fax my marked up GFE's to the mortgage officer with a copy cc'd to my clients and their Realtor.  Put these costs on record so if there is a problem scheduling the closing I can tell my client I disclosed the more accurate costs to your mortgage officer and if the closing is delayed it is not my fault.

When the new HUD-1 goes into effect next year this will be more important than ever.  I do not look forward to preparing the HUD when teh GFE has a recording charge estimate of $200 when the actual recording charges are $375.

August 15, 2009 02:36 PM #38
Rainmaker
1,243,213
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

You have outlined some of my concerns about this issue.  I have looked at the number of homes pending in our market compared to the monthly sales.  These loans are taking way too long as it is.

August 15, 2009 03:13 PM #39
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
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HAROLD.... . sure, re-disclosing is nothing new. Just the fact that it can't be done at closing....  now 3 days in advance and I know this will effect some closings. And yes, we need people to do their jobs in a timely manner. thanks

JEFF.... .well, doing harm in a way that could delay things... but in reality, they needed to crack down, because many still bait and switch at the end. I just heard of a story on Friday to where the loan officer added another $3,000 at closing.  and thanks for the compliment.

DAVID.... . I wonder how many agents and those loan officers that aren't truly following this Act and information. I guess time will tell. Especially in the next 20 days, when loans will start closing after this Act went into affect. And thanks for the compliment.

JOE.... .  how funny, about your ex-loan officer and the story that he told. I love it... thanks for sharing this.

GINGER..... .  thanks for the compliment. And yes, I love pictures, because it can help keep the blog flowing and can keep your attention.  thanks

 

LARRY... . estimate or actual fees?  I don't think it matters much. And over estimating is not going to help, because the act talks about it being accurate up or down... how many lenders will stay on top of that will be the question.

In regards to getting out the revised GFE's as soon as possible? I am not sure this will help. You have a few unknowns that you usually don't know about until later in the processing. Example... you need the homeowners insurance sooner then..  You would need the tax bill/info from the title company sooner. But of the appraiser has different figures than the title company, the underwriter would want to look into this. In my opinion, I don't see this working well, unless nothing changes at the end.  But hey, it could help some, that's if the lender got these 3rd party charges quicker... thanks and thanks for the compliment.

 

JIRIUS.... . I wrote this to not only make people aware of this change, but good loan officer or not, these are costs that effect the APR.  What the loan officer or lender was suppose to do prior to this is re-disclose only the lenders fees that changed.  But yes, this is to keep some of those slimy loan officers from baiting and switching last minute.  At least now, the borrower has 3 days to research this, talk to a lawyer, etc, etc.  Before, many were pressured at closing to close that deal.

ERICA..... .well, make the clients aware of this, if they choose that title company. As a listing agent, this will stink. And this title company, not giving a HUD until the day of closing, they will make a bad name for themselves very quickly in my opinion. I guess time will tell. thanks

 

August 15, 2009 04:43 PM #40
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Jeff Belonger
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DAVID... . it's a shame that you come across so many GFE's that aren't accurate.  I am actually doing a loan in Buffalo that is closing in 2 weeks and another one in Long Island that is closing in a month. One of the biggest fees that I see many loan officers miss is the mortgage tax fee in NY.  And yes, I see many loan officers in many states short escrows for the taxes.  Just last week, a client sent me a good faith estimate from a loan officer that their realtor sent them to.  This loan officer was about $2,000 short in total fees and didn't have the homeowners insurance on there, showing that it needed to be paid for a year.  So I am with you on this rant. I just wrote about this the other day... Good Faith Estimates - Warnings to be aware of !!!

I will disagree with this statement that you made...  "There seems to me numerous interpretations on what has to be included on a GFE.  Am I wrong in my opinion that mortgage officers better start including every possible expense on the GFE?"

Why?  Because not all fees on a good faith estimate are part of the APR, Annual Percentage Rate.  And this new MDIA issue, only states if the APR changes by more than 0.125 percent.

In regards to the new HUD 1 that goes into effect next year?  I fear this form and think the gov't just added more hurt to the borrower than help in a way.  I wrote about this many months ago. Government Intervention - When is enough enough...  but I will agree that next year will even be more important in regards to this MDIA issue...  just more paperwork.  Overall, thanks for your input and feedback.

 

GENE.... .  if dealing with a good loan officer and lender, this new MDIA stuff should not really delay closings much longer. We just need to be on top of our game.  I hear many say that loans are taking longer than ever before..  we are still closing them in less than 30 days.  I closed one a month ago in 12 days...  thanks

 

August 15, 2009 07:25 PM #41
Rainmaker
351,438
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

I really don't understand how a bank can lend me $80,000 in twenty minutes to buy a car, disclose the interest rate and terms and conditions with no changes but the mortgage industry cannot.  The car is worth significantly less the second I buy it and the house is not.  Why does the process take as long as it does?  Why can't a lender approve a loan day one and be done with it?

August 15, 2009 07:38 PM #42
Rainmaker
192,869
R.E. Renée Hoover, Salesperson
Century 21 Geba Realty, Milford, PA - Milford, PA
Poconos, Pike, Wayne, Monroe Counties, PA

Jeff, thanks for addressing this issue, and to all who have enhanced the post with comments.  I personally work with one title company who goes the extra mile to assist me in getting to the closing table with as much ease as possible, Grapevine Abstract out of Stroudsburg, PA.  Bottom line, can you state more precisely where any responsibility relative to this issue (i.e., time is of the essence) can ultimately rest in the real estate agent's lap?  What specifically should the real estate agent be doing to be part of the team effort . . .

Your post and your work on AR is impressive.

August 16, 2009 08:41 AM #43
Rainer
169,250
David J. Stiles
Waynesville, NC

Jeff, getting a GFe correct is not that difficult. Many title underwriters have programs you can download to calculate title premiums, endorsements, mortgage taxes and miscellaneous taxes like Brookhaven's and Warwick open land tax.  Yes, the mortgage tax is often calculated improperly.  It should not happen.

But may mortgage officers pass on listing certains costs such as surveys saying either they are not obligated to list a survey, that the buyer may go with a personal inspection or no survey at all.

Am i correct that there must be re-disclosure if the APR decreases by an 1/8th also?  I had a local loan officer say he was going to prepare the GFE using an interest rate .5% higher than the going rate so that the closing APR could never increase by an 1/8th and he would never have to re-disclosure.  Sounds like that logic is shot.

August 16, 2009 09:44 AM #44
Rainmaker
808,741
Lyn Sims
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg Homes

That's how I see a problem with the title fees towards the end of the transaction.  Everything is disclosed correctly and then something happens and the closing is posponed because the paperwork needs to be redone again at the 11th hour.  This will take some getting used too.  Don't know if people have had problems yet, but wait until a normal market finally comes upon us!  Yikes.

August 16, 2009 10:15 AM #45
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
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DAMON.... . first off, how many people are buying $80,000 cars?  Just curious, because I would bet that you would need excellent credit, great income to qualify, and at least some cash out of pocket. But back to your issue... you asked, "why can't a lender approve you in one day."

There could be many many reasons why. ...  now, most lenders and investors are requiring that the form 4506 be filled out and sent to the IRS. We are double checking income now, making sure that it was properly filed with the IRS.  There are many reasons for this, yet fraud is a large reason for this. You can fake your W-2's.... and even pay stubs. So you also need to order VOE's, which is a verification of income. You need to make sure that the bank statements show the coorect assets to close. You can have large deposits.. you can't borrower money to buy a home, unless it's from your 401-k or from the equity of your house.  There are checks and balances that just don't happen over night. Sometimes the borrower needs to pay off collection accounts and this needs to be verified.

Overall, if you were lending a few hundred thousand dollars, wouldn't you be checking the people twice, possibly 3 times?  Please, be honest.  Fraud is one of the main killers of honest lending and borrowing. It is a lot easy to dummy up stuff than it was in the past. People will lie...  and you just can't repo a house like you can a car.  Does any of this make sense?  Just curious.. thanks

 

RENEE.... .  that's great that you have a title company that goes the extra mile.  As I mentioned, in some cases, I ended up doing some of the title companies work...it just takes time away from me originating new loans or giving my other clients my attention.

On another note, you asked this question... "Bottom line, can you state more precisely where any responsibility relative to this issue (i.e., time is of the essence) can ultimately rest in the real estate agent's lap?  What specifically should the real estate agent be doing to be part of the team effort . ."

As I mentioned, if the realtor chose the title company, that if I need help with anything, that they help contact the title company. The same goes with the borrower, especially if they referred me to the borrower. In a few cases, asking for documentation was like pulling teeth.  This rarely happens, but if so, I need the realtor to get involved and help a little. Overall, communication is extremely important and if the realtor knows something that I might not, then they need to let me know about it. How do they know?  You don't, unless you bring it up. Maybe the property has an issue or an ajoining lot...  I need to know about this. There could be several reasons. The biggest issue to your question?  Getting that preliminary HUD in my hands sooner than 4 days before closing. This way we have some time to get things in order.  thanks and thanks for the polite compliment and kind words.

 

DAVID.... . yes, giving a correct good faith estimate should not be difficult. Then again, define correct... at least close to the figures, a good estimate. Not one that is so far off, that we are talking about $500 or more. I love it when I am like a dollar off or so.  Now, that is also luck, but I always like to over estimate. Which in some cases, I might lose out on that buyer because the other loan officer undercut fees. Who loses out on this?  Well, the buyer and myself. Not only does the buyer need more money, but I might not survive one month because I lost a few deals because someone misled that buyer.  And the bad loan officer wins...

In my opinion, those loan officers that make up excuses for 3rd party fees or as in your example, the survey fee... it comes down to a few things.  They are too lazy and or don't take pride in what they do. I pride myself in being very accurate. It's just part of the job.

You then went on to say ask this... "Am i correct that there must be re-disclosure if the APR decreases by an 1/8th also?"

Yes, you are correct.  This new Act states that an increase or a decrease of 0.125% in regards to the APAR, must be re-disclosed. So this loan officer making all GFE's higher by 0.18%, would be in violation of this. Now, I am not sure how much investors or regulators would stick to this... one would think, anything lower than what I disclosed is great for the borrower. The whole purpose of this new Act and re-disclosing is because of the past... so many baited and switched at closing, the day of closing.  This wouldn't give the borrower much time to react, to consult an attorney, or to seek advice. Many were pressured, well, felt pressured. In reality, they could still have stopped the settlement. Besides, any changes of the lenders fees and or rate/terms, had to be re-disclosed prior to settlement. Not many followed this.  Now the gov't has stepped in to put a time frame on it. And yes, it sounds like the logic of this other loan officer, is shot, big time. It just goes to show me that they either didn't read this new law, or that his company hasn't addressed it in detail to all loan officers, processors, and or closers. Or, they have and he/she just doesn't understand.  thanks for coming back to this discussion and adding my feedback.

 

LYN.... . first, I think we will be hearing of some issues about closings being postponed in 2 weeks or so.  And yes, if the market picks up, yikes.  Wait.. a big yikes.  Look at many of the lenders now, such as Bank of America and Wells Fargo, who on the average, can't get a loan to close in 45 days. I heard from some that this will tack on another 10 days. Within my company, we can still close loans in under 30 days, but it does come down to the loan officer putting together a very good file when submitting it to their processor. I closed a FHA loan in 12 days last month. And that was tough because I had to stay on top of it, which takes more time out of my day, no matter how good the file is put together.  I like to have 30 days and that is usually all I need. But yes, overall, we might be hearing of some horror stories in the next months.  thanks

 

August 16, 2009 12:24 PM #46
Rainmaker
322,619
Tom Burris
NMLS# 335055 - Dallas, TX
Texas Mortgage Dallas Mortgage FHA

I find it comical how non-lenders think this is easy.

Jef, you & I don't go running around saying how easy it is to drive a buyer around in a car.

 

August 17, 2009 09:15 AM #47
Rainer
169,250
David J. Stiles
Waynesville, NC

Here is a link to a recent article from the NY Times: http://www.nytimes.com/2009/08/16/realestate/16mort.html?_r=1&ref=realestate

 

August 17, 2009 02:17 PM #48
Rainer
169,250
David J. Stiles
Waynesville, NC

While facing more last second roadblocks to scheduling closings I came up with a new term, "preventive underwriting."  Just like doctors run unnecessary tests to avoid lawsuits underwriters are coming up creative reasons to not clear a file.  Many properties in my county were given new addresses for 911 purposes. An underwriter wants a letter from the Building Inspector why the address on a 1991 CO does not match the address on his violations report (but the Section-Block-Lot) match.  This is maddness.


The feds and Cuomo are doing all they can to destroy the real estate market.

August 18, 2009 11:09 AM #49
Rainmaker
234,648
Jenny Durling
L.A. Property Solutions - Los Angeles, CA
For Los Angeles real estate help 213-215-4758

The loan processs is obviously complicated. The additional regulations only serve to make things more complicated for loan reps and Realtors alike.

August 23, 2009 10:58 AM #50
Rainer
169,250
David J. Stiles
Waynesville, NC

I just had my first closing postponed because of a change in the APR.  My clients are purchasing a new construction condo from KHov. The lender re-appraised the property yesterday and the value actually came in higher than the first appraisal.  My clients no longer are required to have PMI resulting in a $72 a month savings.  My clients had to re-schedule their days off from work, movers and furniture delivery. Thank god this was not part of a sell/buy transaction.

My clients are suffering a major inconvenience because their mortgage payment is decreasing $72 a month.  The idiots (congressmen and bureaucrats) that write these laws while sitting behind a desk and never having worked in the private sector just don't get it. What possible benefit did my clients gain by this delay?  If their payment increased by $72 I could understand re-disclosure, but not on a decrease.  These are the same idiots that 40% of the country want to trust their health too.

August 27, 2009 04:52 PM #51
Rainmaker
138,774
Gary Miljour
Starboard Financial - Tempe, AZ
Mortgage Lending for Arizona and California

Jeff, great post,

I agree, with this new law and feel that in the long run it will do more to protect the consumer from lenders who want to make a little extra at the end and think they will not have to inform the customer. 

 

August 27, 2009 05:29 PM #52
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