The Federal Reserve has proposed some changes to the Truth in Lending Act (TILA) that will help better protect the consumer and provide less surprises for the consumer during the closing process.
- Improve the disclosure of the annual percentage rate (APR) so it captures most fees and settlement costs
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Require lenders to show how the consumer's APR compares to the average rate offered to borrowers with excellent credit
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Require lenders to provide final Truth in Lending Act disclosures at least three business days before loan closing
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Require lenders to show consumers how much their monthly payments might increase, for adjustable-rate mortgages.
These changes will help the consumer to better understand every detail of their financing, while protecting them from the "at the closing table" increase in rates. The second bullet point is great, "Require lenders to show how the consumer's APR compares to the average rate offered to borrowers with excellent credit" because many consumers do not know how much poor credit affects their chances of securing low interest rates in their home purchase. There are many step one can do to increase their credit rating (and no, it does not take too long either).
In conclusion, these changes to the Truth in Lending Act should help consumers to set aside their fears of entering the mortgage world, because disclosures and transparency are becoming the name of the game.
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