Important News - New Truth-In-Lending Act Changes Could Effect Real Estate Settlements

The Housing and Economic Recovery Act of 2008 included several revisions to the Truth in Lending Act (TILA.) These important revisions go into effect on July 30, 2009.

While most changes will not be noticeable to you, there are new requirements that will impact processes and possibly closing dates. However, I hope with continued communication and awareness of these changes, we will avoid any problems.

The key changes effective with all applications on or after July 30, 2009 are:

Collection of fees: Lenders cannot collect a fee from the consumer, other than a reasonable fee for obtaining the consumer's credit history, until the consumer is in receipt of the initial Truth-in-Lending (TIL.)

TIL disclosure applicability: Lenders must now provide a TIL on refinance transactions.

New statements added to all TIL disclosures: "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."

Initial TIL waiting period: A loan cannot close until seven business days from the delivery of the initial TIL. For example: Lender places loan disclosures in the mail on Monday, August 3rd, the loan cannot close until on or after Tuesday, August 11th. Business days are the same for as used for recission periods on refinanced loans - Monday through Saturday excluding public holidays.

Annual Percentage Rate (APR) re-disclosure tolerance: After the initial TIL is given if there are any changes that effect the APR and cause the APR to go up by 0.125% for fixed rate products (or 0.250% for ARM products) a new TIL must be given to the borrower. The new waiting period is three business days after the borrower receives the revised disclosures. A borrower is presumed to have received the new disclosures within three business days if placed in the mail. This creates a six day waiting period, three days to receive the disclosures and a three day waiting period. If a new / revised TIL is required and it is hand delivered or provided in another manner more prompt that regular mail to the borrower, the TILA mandates that the closing  not occur for 3 business days from the date the borrower receives the revised disclosure. The delivery will need to be documented by receiving a signed and dated revised TIL.

It should be noted that the fees used to calculate the APR are not just the fees charged or controlled by the lender. It is also affected by the fees and costs charged by the settlement agent. A lender must estimate the closing costs of the settlement agents. If these costs are higher than the original estimate it could trigger the need for re-disclosure. 

In order to insure that I continue to meet your expectations loans will have to be locked earlier in order to assure the settlement is not delayed by the new required waiting periods. It's also important to get closing costs from the settlement company as quickly as possible so any adjustments can be made quickly and not cause a delay in the settlement.

As you mortgage consultant, I want you to be aware of these important  changes, particularly the initial TIL waiting period and APR re-disclosure tolerances. As always, I will keep you posted on any other important changes.

Call me with any questions you have concerning the current market.

To keep up with the trends in interest rates you can visit my Daily Market Report at www.mtg-info.net/DailyMarketReport.

I am always available to answer any questions you have concerning interest rates or mortgage loans.

Whether your looking to buy or refinance, call me today. I'm here to help. The best place to reach me is at my home office 301.353.9360. You can also email me at mtginfo@aol.com

Alan Gross
Home Office: 301.353.9360
Email: mtginfo@aol.com
Web: www.mtg-info.net