What Are Mortgage Disclosures?
If you are planning on applying for a mortgage loan, whether it is a home purchase mortgage loan or a refinance mortgage loan, be prepared to be overwhelmed with dozens of paperwork for you to sign and review before your mortgage loan application can proceed. Our regulators and politicians have mandated that proper mortgage disclosures needs to be disclosed and that all mortgage disclosures need to be properly dated. If the date on the mortgage disclosure is off by a day or two, mortgage lenders needs to re-disclose the mortgage disclosures or otherwise they are under RESPA violations and can be fined, censured, or have their mortgage licenses revoked. Many mortgage loan applicants are the actual victims of the overwhelming paperwork because the politicians and regulators have teamed up and made this mandatory because it is to the best interest of the public. I totally agree in issuing full disclosures, however, a lot of these mortgage disclosures are very difficult to understand even to the licensed mortgage professional.
Regulations On Mortgage Disclosures
Mortgage regulators and the Federal government mandates that a mortgage lender to provide a series of important mortgage disclosures to any mortgage loan applicant that applies with the mortgage lender within 72 hours of the mortgage lender signing the mortgage loan application. Mortgage disclosures needs to be constantly provided to all mortgage loan applicants before, during, and after the mortgage loan application and closing process. Mortgage disclosures can sometimes be difficult to understand but the federal government uses their own mandatory mortgage disclosure forms that needs to be disclosed to mortgage loan applicant and is uniform. They require this because they feel by providing complex mortgage disclosures will protect public consumers even though the majority of the public do not understand nor read the full lengthy mortgage disclosures and just want to know where they sign.
Mortgage Disclosures Prior To Closing
Once you, as a mortgage loan applicant, sign and submit your 1003 mortgage loan application, your mortgage loan originator or mortgage broker has 72 hours, or 3 days, to give you a series of mortgage loan documents also known as mortgage disclosures.
TILA: Truth In Lending Disclosure Statement
The Truth in Lending Disclosure Statement, also known as TILA mortgage disclosure, is one of the mandatory mortgage disclosures that your mortgage loan originator or mortgage broker needs to provide you with within 3 days, or 72 hours upon submitting your official mortgage loan application. The Truth in Lending Disclosure Statement will state the following:
1. Annual Percentage Rate, also known as APR.
2. Total amount of mortgage financed.
3. Your proposed monthly housing payment.
4. The total of all of your payments.
5. The total of all finance interest charges.
6. Late payment fees and charges.
7. Pre-payment penalties if applicable. Since the inception of the SAFE ACT, pre-payment penalties cannot be charged by residential mortgage companies.
Settlement Costs And Information
Another mortgage disclosure that your mortgage loan originator or mortgage broker needs to disclose is the Settlement Costs and Information booklet which is developed and issued by the United States Department of Housing and Urban Development. The purpose of this booklet is to explain to consumers the types of fess and costs a consumer is likely to incur for taking out a mortgage loan they are applying for.
The Good Faith Estimate: GFE
The purpose for the Good Faith Estimate is to itemize and break down the overall settlement charges and costs. Most mortgage lenders over disclose the estimated fees and costs on the Good Faith Estimate, GFE, because if a mortgage loan originator or mortgage broker underdiscloses, they need to cough up with the fees and costs even though they have nothing to do with the third party charges. Any charges or costs of 10% over the charges or costs listed on the Good Faith Estimate, the mortgage lender is responsible for those charges. Here is the items that is listed on the Good Faith Estimate, GFE.
1. Total mortgage loan origination fees.
2. Credit report fees and costs.
3. Appraisal and inspection fees and costs.
4. Buy down points for reduced mortgage rate.
5. Pro rate mortgage interest expense.
6. Homeowners insurance and mortgage insurance premiums.
7. Third party title search costs and fees as well as title insurance premiums.
8. Document preparation and recording fess and costs.
If your mortgage company is plannng on selling the mortgage loan servicing rights to your mortgage loan, which is collecting and managing your monthly payments and escrows, the mortgage company also needs to disclose the Transfer of Servicing Disclosure Statement. This mortgage disclosure informs the mortgage loan borrowers about the mortgage company’s potential right to transfer the right to service the mortgage loan to a different third party servicing mortgage lender.
Initial Escrow Account Disclosure
The Initial Escrow Account Disclosure needs to be disclosed to the mortgage loan borrower. The initial escrow account disclosure will state the following:
1. The mortgage loan borrower’s escrow account requirements.
2. Cash from borrower due at closing.
Post Closing Mortgage Disclosures
Once you have closed on your mortgage loan, your mortgage loan originator or mortgage broker will provide you with another set of mortgage disclosures for you to review and sign. You will need to review these new mortgage disclosures with the inital sets of mortgage disclosures that you were given earlier. If you see any drastic differences between the two mortgage disclosures, then notify your mortgage loan originator or mortgage broker to explain the discrepancies.
Final Good Faith Estimate Of Settlement Costs
The Final Good Faith Estimate of Settlement Costs will disclose the final costs and settlement charges and the final closing expenses incurred by the mortgage loan borrower. You will also get a private mortgage insurance disclosure which specifically explains the terms of your private mortgage insurance and the benefits to the lender. Appraisal notice mortgage disclosures needs to be disclosed to you as well that states your right to obtain a copy of an appraisal report.