New Morgage Disclosures That Could Affect Closing Dates
Posted by Nancy Comenitz on Saturday, August 8th, 2009 at 4:50pm.Revised Truth In Lending Act Disclosure Requirements Take Effect on July 30, 2009
Lenders will be subject to new disclosure requirements for mortgage loans under the Federal Reserve Board Truth in Lending Regulation (Reg Z).
These changes are required by the Housing and Economic Recovery Act (HERA) and its section entitled the Mortgage Disclosure Improvement Act (MDIA) as it amends the Truth in Lending Act (TILA)
Highlights of the New Rule:
Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan. The lender may not collect any fees before the disclosure is provided, except for reasonable fees for obtaining a credit report.
What loans are affected?
The new requirements apply to all mortgages secured by a borrower's home, including primary and second homes and refinancing. Investor loans continue to be exempt.
What timelines have changed?
Early disclosures must be sent within 3 (business) days of application and are deemed received (if mailed) 3 business days later. However, under the new rule the closing
cannot occur for at least 7 days after mailing or delivery of the disclosures.
If the APR (annual percentage rate) changes by more than 0.125 percent, the lender
must provide a corrected disclosure to the borrower and cannot close the loan for a minimum of three days after, which date is three days after mailing of the disclosure. While waiver of these time requirements is possible, it is only in the most egregious of circumstances.
As a practical matter, this will mean that an undetected APR change beyond the tolerances, if discovered the day of closing, would delay a closing date for as much as a week.
Federal Reserve Board Final Rule and Staff Commentary (Federal Register, May 19, 2009)
http://edocket.access.gpo.gov/2009/pdf/E9‐11567.pdf
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