Effective July 30. 2009, the Federal Reserve Board Truth in Lending Regulations have become more stringent. The new requirements apply to all mortgages secured by a borrower's home, including primary and second homes and refinancings. Investor loans continue to be exempt.
Here are key highlights of the changes, all of which are designed to protect consumers:
- Early Disclosure- Within three business days after the consumer applies for a loan, lenders must give good faith estimates of mortgage loan costs.
- Disclosure Prior to Collecting Lender Fees- The lender may not collect any fees before the disclosure is provided, with the exception of a reasonable fee for obtaining a credit report.
- Seven-day Waiting Period- The closing may not occur until expiration of a seven-day waiting period after the consumer receives the Early Disclosure.
- Bona Fide Emergency Waiver Provision- Documented financial hardships may warrant an exception to this rule, after the consumer receives the Early Disclosure.
- Corrected TILA Requires Additional waiting period- If the annual percentage rate (APR) changes by more than 0.125%, the lender must provide a corrected disclosure and wait an additional three business days before closing on the loan.
As REALTORS®, we need to be aware of these changes to the TILA legislation in order to advise clients of potential delays in loan processing and settlements. The days of a "quick turn-around" for a mortgage loan and settlement are gone. When preparing a Purchase Sales Agreement on behalf of buyer clients, or reviewing an offer on behalf of our home owner , these extended time lines need to be addressed, especially when trying to coordinate two transactions on the same day.
Some of the variables affecting the APR, in addition to interest rate, are lower credit scores, increase in closing costs such as appraisals, PMI fees, higher than expected pre-paids, and higher loan principal, for example.
If you would like more information on this topic, check out this web sie: http://speakingofrealestate.blogs.realtor.org/2009/07/29/new-reg-z-rules-could-slow-closings/