Aug. 5, 2009 - How the new "Regulation Z" may affect "U"

Consumer disclosures and the Truth in Lending Act (TILA)

Regulation Z" is a federal regulation requiring creditors to provide full disclosure of the terms of a loan including the terms or the loan and the annual percentage rate (APR). Changes that became effective July 30, 2009 requires that lenders must comply with new rules under the Truth in Lending Act (TILA) as required under the Mortgage Disclosure Improvement Act (MDIA) which was part of  The Housing and Economic Recovery Act of 2008.

These changes are expected to slow the timeline for obtaining a new mortgage or refinacing to a minimum of two months - at best.  There are some predictions the new reality might be a timeline of up to four months.  This is because it is anticipated that many lenders may add their own time restrictions as a safety precaution against violating the new waiting periods and thereby cause additional delay to the mortgage process. Failure of lenders to adhere to the proper waiting periods for certain disclosure items resets the waiting period requirements.  In addidtion, new changes in Reg Z may result in higher lender costs which are likely to be passed on to borrowers.

Here is a summary 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.

• Consumers may shorten or waive the 3 day and/or 7 day waiting periods for a “bona fide personal financial emergency,” but only after receiving an accurate TILA disclosure.  In the final rule’s preamble, the Fed stated that it “believes waivers should not be used routinely to expedite consummation for reasons of convenience.” The Fed decided not to insulate lenders from liability even where a consumer modifies or waives the waiting periods.

 • If the annual percentage rate (APR) changes 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. 

Source: National Association of Reators (NAR)

Aug. 5, 2009 - RE: How the new "Regulation Z" may affect "U"

First time home buyers looking to benefit from the $8,000 tax credit should act sooner rather than later to find a home. The tax credit expries December 1, 2009. The window may start to close as soon as September.