New truth-in-lending rules effective July 30

WASHINGTON – July 23, 2009 – Revised TILA (Truth in Lending Audit) disclosure requirements take effect this month. Under the new rules, 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. For lenders, the new rules are complex and make compliance difficult, according to the National Association of Realtors® (NAR). While Realtors do not have to understand the full law, NAR says, they should understand the basics so they can advise clients of potential delays under the new procedures.

Key highlights of the change include:

• 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 three 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 seven-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 three 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.

To read the Federal Reserve Board Final Rule and Staff Commentary (Federal Register, May 19, 2009) in PDF format, go to: http://edocket.access.gpo.gov/2009/pdf/E9-11567.pdf

Source: National Association of Realtors

© 2009 FLORIDA ASSOCIATION OF REALTORS®

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