Truth-in-Lending Changes
Truth-in-Lending Changes Take Effect July 30, 2009
Key Points by Kristin Seltman, Esq., Staff Attorney
On July 30, 2008 Congress enacted the Housing and Economic Recovery Act of 2008, which included amendments to TILA, known as the Mortgage Disclosure Improvement Act (MDIA). The Implementation of MDIA will take effect on July 30, 2009, approximately two months earlier than the originally published date of October 1st, 2009. Summarized below are the rules for all for all loan applications received beginning July 30, 2009:
1 – Initial Fees Lenders may only collect a fee for the reasonable cost of a credit report prior to the issuance of the initial disclosures. Disclosures must be given before the consumer pays any fee, other than a bona fide and reasonable fee for obtaining the consumer’s credit history.
2 – Initial Disclosure Statement Lenders must continue to issue disclosures 3 business days from application, however, the issuance of the initial TIL Statement now extends to “any extension of credit secured by the dwelling of a consumer” which includes refinance transactions and home equity loans.
3 – Notice of “No Requirements to Complete” The MDIA requires that the early disclosures contain a clear and conspicuous notice containing the following statement: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”
4 – Revised APR Three Business Day Notice If the APR is out of tolerance, lenders must re-disclosure three business days prior to consummation.
5 – Seven Business Days Prior to Consummation Lenders must allow applicants to have a 7 business day waiting period after mailing or delivering the TIL prior to closing of the loan. This timing is not based on receipt date (or assumed receipt date) by the consumer- the timing begins with the mailing or delivery by the lender.
6 – Business Day The definition of business day for both the 3 and 7-day waiting periods is all calendar days except Sundays and holidays.
7 – Waivers Borrowers may waive both the seven-day and three-day waiting period to meet a bona fide personal financial emergency. However, if the TIL Statement is out of tolerance, the waiver is no longer effective. After re-disclosure, borrowers must submit a signed statement describing the emergency.
8 – Denied or withdrawn applications Lenders may determine within the three-business-day period that the application will not or cannot be approved on the terms requested. If the consumer withdraws the application within the three-business-day period, the creditor need not make the disclosures under this ruling.
9 – Written application RESPA defines a written application as the submission of a borrower’s financial information in anticipation of a credit decision relating to a Federally related mortgage loan. An application is considered received when it reaches the creditor by mail, hand delivery, or through an intermediary agent or broker.
10 – Timeshare Transactions Lenders must comply with the initial disclosure requirements; however, both the 3- and 7-day waiting periods do not apply.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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