The Federal Reserve Board has announced changes to consumer protection regulations for mortgages that will take effect on July 30, 2009.
The Federal Reserve Board approved final rules that revise the disclosure requirements for mortgage loans under Regulation Z (Truth in Lending) . Regulation Z is a consumer protection regulation that requires lender disclosure of the cost of financing a home, and has been revised to provide greater consumer protection. The revisions are an amendment to the Truth in Lending Act (TILA) called the Mortgage Disclosure Improvement Act (MDIA) . The MDIA covers primary residences and second home applications made on or after July 30, 2009, and requires that lenders provide disclosures earlier in the mortgage process. The MDIA requires the following waiting periods:
- Lenders must give good faith estimates of mortgage loan costs ("early disclosures") within three business days after receiving an application for a mortgage loan. The only fee that can be collected within this three day period is a nominal credit report fee.
- Lenders must wait seven business days after they provide these early disclosures before closing the loan.
- If there are any changes during processing to the terms or cost of the mortgage, you will receive a new disclosure with a revised annual percentage rate (APR), and wait an additional three business days before closing the loan. A change that results in an increase to the APR of 0.125% requires re-disclosure. Closing can occur no sooner than three business days after re-disclosure. "Business days" include Monday - Saturday (excluding holidays).
The rules would permit a consumer to expedite the closing to address a personal financial emergency, such as a foreclosure. However, most lenders will not promote this as an option. The burden of proof is on the lender to deliver disclosures and most will not want to make exceptions in fear of closing a loan that is out of compliance. Responsible lenders have already been doing this disclosure/re-disclosure all along. On most transactions, the actual increased time required to process loans due to MDIA may be three to seven days. Plan on additional delays in closing your next real estate transaction as lenders adhere to the new law.
Conforming Conventional 30Yr Fixed 5.25%
Conforming Conventional 15Yr Fixed 4.75%
Conforming Conventional 5/1 IO ARM 4.5%
FHA 30Yr Fixed 5.375%
* Above Conventional rate quotes are as of 7/22/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score. APR includes $1,200 in lender fees and 980 in title charges (title charges may vary). FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required. No origination or discount points.