August 19, 2009: Did you apply for a mortgage recently? Did you notice anything different? As of July 30, 2009, all loan applications are now subject to the Mortgage Disclosure Improvement Act (MDIA), a revision to the Truth in Lending Act which governs how and when borrowers receive important mortgage disclosures.

According to the HUD website www.hud.gov, the Act is intended to help provide more information about closing costs and to make it easier for borrowers to compare closing costs between lenders. As a mortgage lender and proponent of financial education, I heartily support the intention of the Act, but I would also like to point out how you can avoid the pitfalls inherent in its implementation.

Under the Old Rules: First, let's go over how it used to work when you applied for a mortgage: You would fill out an application, pay an application and/or appraisal fee, and within three business days of receiving your application, your mortgage lender had to send out disclosures which included a Good Faith Estimate (GFE) of closing costs and a Truth in Lending (TIL) disclosure.

So if you applied on a Monday, your disclosures might go out as late as Thursday, which meant you might not get them until Saturday or Monday. During that time, your lender would be asking you for documents to underwrite your file; they would have ordered an appraisal, so by the time you got your disclosures, you might feel compelled to go forward even if you had questions or concerns about the costs associated with your loan. Let me point out that at Amerifund, even before this new regulation took effect, we routinely issued GFEs and TILs upfront to anyone who asked, before they paid us a dime. Any reputable company would do the same.

Under the New Rules: With the new rules in place, you won't feel stuck with a mortgage you don't want or can't afford. Here's how it works: You apply for a mortgage on a Monday, and your lender is prohibited from accepting any money from you (except a reasonable credit report fee) until you receive your disclosures.

If they mail the disclosures, they have to wait three business days after mailing them in order to accept an appraisal or application fee. So now, in theory, this time lag offers you time to "shop around" and choose the best deal. But if you're like most people, you've already done your shopping before you applied. Once you apply, you want your lender to work on your application and get you approved.

But they can't. They can't order an appraisal; they probably don't want to process your application without receiving any money from you, so you and your lender both wait the three business days until they can start the process "for real."

So Here's a Tip: The Act says that a lender cannot accept fees until you have received your disclosures. So make sure to provide your lender with an e-mail address and/or fax number so you can receive them right away. This way your lender does not have to wait the three business days to start working on your loan.

The MDIA also has a "late disclosure" provision, which is triggered if the annual percentage rate (APR) on your loan increases by more than .125% from the early disclosures.

Let's say you applied for a 30-year fixed. When you applied, the rate was 5.25% with no points. The APR was 5.351%. You chose not to lock in. You thought rates might come down between application and closing. Now it's Thursday, and you're ready to close. In fact, you've scheduled a closing for the coming Tuesday. But rates have gone up. Right now they're at 5.50% with no points for the same 30-year fixed. You have a feeling rates might come down once the monthly jobs report on Friday is released. You wait one day; the jobs report comes out; the unemployment numbers exceed expectations; bonds rally; rates go down. Now you can get 5.375%. You're happy with this rate; you know you're closing in two days; you can't wait for any further improvement; you say, "Go ahead-lock me in at 5.375%."

Guess what? You can't close. Why not? Because at 5.375%, the new APR on your loan is now 5.477%. That's an increase of .126% compared with your initial disclosures, which means your loan now must be "redisclosed." According to the MDIA, there must be a three-business day waiting period between the date you receive the new disclosures and the closing date. Let's say your lender mails your new, final disclosures on Friday, the day you locked in. They will then have to wait Saturday, Monday, Tuesday (Tuesday would be considered the day you received them), then three more business days (Wednesday, Thursday, Friday). So you could close Friday.

But you want to close Tuesday. Rescheduling your closing means also rescheduling the closing of the people you're buying from, the closing of the people you're selling to, not to mention the movers, the floor refinishers, the painters, and the phone/cable/internet providers.

How do you avoid delaying your closing? The same tip applies: Make sure your lender has your e-mail address and/or fax number so they can send you the new disclosures immediately to cut down on the waiting time. It seems obvious in this day and age to request electronic transmission of important documents, but some lenders use one approach for all borrowers-they automatically mail everything. But if you had requested e-mail or fax transmission of your disclosures, your lender would have sent them on Friday, the day you locked in, the three business days (Saturday, Monday, Tuesday) would elapse, and you could still close on Tuesday.

Here's another tip: If you want to avoid having the final disclosure provision delay your closing, don't cut it too close when you decide to lock in a rate. Either lock in up front, with enough time to cover your closing date, or lock in at least seven business days away from your closing, just in case your lender is not set up to e-mail or fax disclosures.

If you have any feedback on how the Mortgage Disclosure Improvement Act has affected you, please email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Or call me at (212) 922-9555 x203.

Editor's Note: Eris Saari is the President of Amerifund Home Mortgage, a direct lender located in Manhattan. She has two children in the Bronxville School and has lived in the village since 1996.