What Is the Mortgage Disclosure Improvement Act (MDIA)?

The Mortgage Disclosure Improvement Act (MDIA) of 2008 is a list of amendments to the Truth in Lending Act (TILA) of 1968. The MDIA requires lenders to provide borrowers with accurate and up-to-date information about their mortgage loans. Also known as the “3/7/3 Rule,” the purpose of the MDIA is to help borrowers make informed credit decisions by giving them enough time to review the terms and conditions of their mortgage loan agreements. Keep reading to find out what the MDIA does, who it applies to, and what its specific requirements are.

What does the Mortgage Disclosure Improvement Act do?

The MDIA protects borrowers against predatory lending by ensuring transparency in mortgage lending transactions. The MDIA mandates lenders to provide disclosures within three business days of a mortgage loan application, and prohibits closing on a loan until at least seven days after disclosures are given. These timelines ensure that borrowers have enough time to review mortgage disclosures before closing on a home loan.

Who does the MDIA apply to? 

The MDIA applies to creditors and lenders offering consumer mortgage loans covered by the Truth in Lending Act (TILA). TILA is a U.S. federal law that requires lenders to provide clear disclosures of loan terms, costs, and conditions in consumer credit transactions. The MDIA supplements TILA requirements and applies specifically to mortgages. It covers mortgage lenders, brokers, and other financial institutions providing mortgages, home equity loans, and refinances. It does not cover home equity lines of credit or timeshare plans.

What are the MDIA requirements?

MDIA requirements can be summarized in four simple areas regarding disclosures: early disclosures, cost disclosures, fees before disclosures, and disclosures for loans secured by a dwelling. Here’s what you need to know:

Early disclosures

Lenders must provide mortgage borrowers with a Loan Estimate within three business days of receiving your mortgage application. After that, lenders must wait at least seven business days before closing on the loan, even if the borrower is ready to close beforehand. For example, if you submit your mortgage application on Monday, the 1st, you should receive a Loan Estimate no later than Thursday, the 4th. The earliest you can close on that loan is Monday, the 15th. However, most real estate closings take between 30-45 days after an agreement is signed.

Cost disclosures

Lenders must provide mortgage borrowers with cost disclosures that cover the payment summary, payment schedule, and examples of how interest rates and how monthly payments can change in the future. This document, often referred to as a Closing Disclosure, is required to be provided to you at least three business days before your scheduled closing date.

Certain fees can impact a loan’s Annual Percentage Rate (APR), which is why the MDIA has specific rules regarding APR disclosures. If the APR changes by more than 0.125% on a fixed loan or 0.25% on an adjustable loan before closing, lenders must issue a revised disclosure and wait another three business days before moving forward. 

Here is a list of fees that if changed from your Loan Estimate to your Closing Disclosure, would require a revised disclosure and an additional three-day waiting period before closing:

• Underwriting fees
• Administrative fees
• Processing fees
• Origination fees
• Courier fees
• Discount points
• Mortgage insurance premiums (MIP)
• Upfront mortgage insurance premiums (UFMIP)
• Escrow agent fees
• Attorney fees
• Wire transfer fees
• VA funding fees
• Tax service fees
• USDA guarantee fees

Fees before disclosures

Lenders are required to provide borrowers with disclosures before charging them fees. The only exception to this rule is a credit report fee, which a lender uses to do a hard credit pull and assess your credit score. The earliest a lender can impose a fee on a borrower is three business days after a mortgage loan disclosure has been mailed. However, if the borrower has received the disclosure earlier, the lender can impose a fee after they’ve received confirmation from the borrower that the disclosure is in their possession.

Disclosures for loans secured by a dwelling

Lastly, lenders are required to provide disclosures for loans secured by a home, whether it's the borrower’s primary residence, or not. Lenders are required to mail or electronically deliver Loan Estimates of TILA disclosures to all borrowers pursuing a mortgage loan secured by a dwelling within three business days of receiving a borrower’s mortgage loan application. 

*Zillow Home Loans; an equal housing lender. NMLS #10287