Jul 29, 2009
New Truth in Lending requirements take effect
29 Jul 2009
Posted by Andrew Kantor
Starting July 30, lenders will have to comply with some new disclosure requirements under a rule change that comes out of the Mortgage Disclosure Improvement Act (MDIA).
Bottom line: Residential borrowers who are financing (or refinancing) a primary or secondary home will see some changes from their lenders and may face some additional delays. (Investors’ loans are exempt.)
Lenders are required to give good faith estimates of mortgage loan costs within three business days after the consumer applies for a loan; it can’t collect any fees before providing that, except to pay for a credit report.
After this early disclosure, there’s a seven-day waiting period before the sale can close, although consumers can waive this for a “bona fide personal financial emergency” if they have received an accurate TILA disclosure. (The Fed made it clear that waivers should not be used just to speed things up. Even if a consumer waives the waiting period, lenders are insulated from liability.)
And if the loan’s APR changes by more than 0.125 percent, the lender must correct the disclosure, get the new version to the borrower, and wait an additional three business days before closing the loan. (“APR” in this case includes the interest rate and certain settlement costs. That means lenders will have to be extra careful calculating those fees, or they risk having to go through that corrected-disclosure process.)
For those who like the nitty-gritty, here’s a link to the full text in the Federal Register (PDF).