MORTGAGE DISCLOSURE INFORMATION ACT

There are recent changes in the federal Truth in Lending Act regulations which will have an impact on mortgage processes. It will require a fundamental change in how lenders finalize loan terms for the borrower prior to closing. Changes at the closing table could require the borrower to reschedule the closing date if a revised Truth In Lending statement is needed.

Summary

The rules for the Mortgage Disclosure Improvement Act were finalized Friday, May 8th and it is applicable to all mortgage lenders (federally chartered or state licensed). For applications taken as of July 30, 2009, new requirements about the delivery and the accuracy disclosures will apply. One of the new requirements is that the borrower must be provided with an accurate APR (annual percentage rate) disclosure at least three business days prior to closing. It must be in their hands three business days prior to closing and they are permitted to close on the 3rd business day after receiving it or later
An easy way to remember new rule is 3/7/3. This means
3 days after application – An initial truth in lending statement must be provided no later than 3 business days after receipt of the application. Some lenders such as Coldwell Banker Mortgage have a current process which generates an auto-compliance package which complies with this requirement so no changes are needed.

7 business days after initial application – Waiting period - the borrower is not permitted to close until at least seven business days have passed since the TIL (Truth in Lending statement) was placed in the mail or provided to the borrower.

3 business days prior to closing – Waiting period - The borrower must receive an accurate APR on their TIL at least 3 business days prior to closing. If it was provided before that period of time because the loan terms were locked in earlier in the process, no new TIL is required if there is no change to the APR or the change is less than 1/8th (¼ for construction loans).



If the final loan terms cause the TIL APR to be understated by more than 1/8th, a revised TIL with an accurate APR must be provided to the borrower so they receive it at least three business days prior to closing. It must be in their hands at that time and they may close on the 3rd business day after it.

Some issues to consider and address:

New timing requirements will limit rush closings and could delay closings.
Closing table changes and redraws may result in having to reschedule the closing date.