The Truth in Lending Act (TILA) dates back to 1968 and was put into place as a protection for consumers requiring full and clear disclosure of the terms related to credit transactions, most especially all costs involved. Mortgage brokers and loan officers who stay on top of regulations will be able to plan for these changes but it is important that you are aware of them as well, especially if you want to be sure everything with your home loan goes as seamlessly as possible.
The changes in the Truth in Lending Act are mainly on the new disclosure requirements for the applied mortgage loan of the consumer. The Federal Reserve Truth in Lending Regulation applies its revised laws for loans filed and submitted since July 30, 2009. Most lenders find the revised version of the TILA quite complicated and challenging, oftentimes causing delays for the supposedly swift transaction between buyers and sellers.
Here are some of the main changes included in the July 30, 2009 TILA update:
Fee Collection Limitations Imposed Until the consumer has reviewed the Truth-in-Lending (TIL) paperwork, mortgage lenders are not allowed to collect fees from consumers in excess of those fees required to cover the cost of obtaining borrower credit history. This paperwork includes, but is not limited to, the information found as part of the Good Faith Estimate, which discloses your loan’s annual percentage rate, finance charges, the amount financed, and the total payments you’re required to make. TILs must also be provided on refinance mortgages.
7-Day Waiting Period in Effect For mortgage transactions, business days run from Monday to Saturday. Home loans are not allowed to close until 7 business days after borrowers receive the TIL.
A “You’re Not Committed” Statement has Been Added Essentially, you’re not obligated to close the loan just because you’ve received disclosure documents or have signed a mortgage application. It allows lenders to not pressure you into anything. If you don’t feel right about the deal, don’t sign it.
New Annual Percentage Rate (APR) Change Waiting Period is in Effect If the APR changes, a 3-day waiting period is tacked on before the loan can close. This means that if you are quoted one APR, and then that APR changes for any reason, then the lender is required to wait an additional 3 days after you’ve received the revised paperwork before they can close the loan. Each time the APR changes, another 3-day waiting period goes into effect.
All in all, these changes are meant to provide borrowers with added protection against mortgage fraud. But, you should not only rely on these regulations. Always demand clarity and up-front disclosure from your mortgage broker. Once the deal is delivered, the obligation then falls on you to read through your loan documents and decide whether the deal makes sense to you or not.
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