RESPA and TILA Updates
Buyers and lenders take note! In an effort to prevent deceptive and/or fraudulent loan practices, new federal regulations modifying the Truth and Lending Act took effect at the end of July 2009. Under these new requirements, lenders may not collect upfront application fees from the borrower until the borrower has received the Truth in Lending Disclosure and the Good Faith Estimate. Furthermore, closing cannot take place until at least seven business days after these two disclosures have been issued.
Moroever, after the two disclosures are issued, if there are any further changes to the closing figures that would result in an APR change of greater than .125% (for a fixed-rate loan) or .250% (for an adjustable rate mortgage), the lender MUST redisclose the Truth in Lending Disclosure and Good Faith Estimate, reflecting the changes in the fees and closing figures, to the borrower. Three additional days are required between redisclosure and closing.
Will these changes help prevent deceptive mortgage practices? Well, that remains to be seen. In the meantime, buyers and lenders should work diligently to complete the mortgage process to ensure a timely closing!