Real Estate Blog

Hi Everyone:

When applying for a mortgage for your primary residence, the lender must, by law, provide you with a good faith estimate 3 days after loan application or at least prior to signing the loan documents (whichever is earlier).  To view the actual statue (law) that governs this requirement, please click here: http://www.fdic.gov/regulations/laws/rules/6500-1700.html#6500226.19 Now for my "legal disclosure."  I am neither qualified nor do I imply that I am giving any legal advice.  If you need further understanding of any legal issues, you should always consult an attorney. I am merely providing information as I understand it regarding the Truth In Lending Act.

As of 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). The new requirements apply to loan applications filed on or after July 30, 2009. The new rules are complex and compliance will be a challenge for lenders. REALTORS® will want to learn the basics so they can advise clients of potential delays and the new procedures. Here are key highlights of the changes:

-- 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.

--Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure). The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.

--The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.

--If the annual percentage rate (APR) increases by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan. The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure.

--The consumer may modify or waive both waiting periods for a documented personal financial emergency, but must receive the disclosures no later than the time of the modification or waiver.