As if things weren't complicated already: Latest Changes to Regulation Z

As if things weren't complicated already, there is a recent new development in mortgage lending that may pose a challenge for lenders. There are important changes to the Federal Reserve Board Truth in Lending Regulation (Reg Z), and applies to loan applications filed on or after July 30, 2009. Lenders will have new disclosure requirements for mortgage loans.

Because this development is complex, it could result in potential delays in getting loan approval and in getting to closing. Key highlights are as follows:

• This applies to all mortgages secured by a borrower’s home, including primary and second homes and refinancings. It does not apply to investor loans.

• After someone applies for a loan, lenders must give good faith estimates of mortgage loan costs within 3 business days. This is called "early disclosure". Other than charging a reasonable fee for a credit report, the lender may not collect any fees before the disclosure is provided.

• There is a 7 day waiting period after the consumer receives the early disclosure, during which no closing can occur.

• The waiting periods may be shortened or waived for a “bona fide personal financial emergency,” but only after receiving an accurate TILA (Truth In Lending Regulation) disclosure. The Fed has stated that it “believes waivers should not be used routinely to expedite consummation for reasons of convenience.” The Fed has decided not to insulate lenders from liability, even where a consumer modifies or waives the waiting periods. (I see lenders discouraging consumers from shortening or waiving the waiting periods to protect themselves).

• The lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan if the annual percentage rate (APR) changes by more than 0.125 percent. Now more than ever it is important for any fees to be as accurate as possible, because the APR includes not only the interest rate on the loan, but certain other costs related to settlement that would call for a corrected TILA disclosure.

To read more about the new rule, here's a link:

https://www.wellsfargo.com/downloads/pdf/mortgage/HERA_HOEPA_Retail_FINAL_E.PDF

"Each step of the way it gets more complicated, requiring more knowledge and experience: knowledge and experience that we as Realtors® have and bring to task."
– Ron Phipps, 2009 NAR First Vice President