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Friday, July 24, 2009

New Laws for Lending Practices Take Effect on July 30

In May of 2009, the Federal Reserve Board approved changes to the disclosure requirements for mortgage loans. Those changes are going into effect on July 30, 2009. The new rules revise Regulation Z (Truth in Lending) to provide greater consumer protection.

The revisions are an amendment to the Truth in Lending Act (TILA) which implement the Mortgage Disclosure Improvement Act (MDIA).

The new rules:
1. Creditors must give good faith estimates of mortgage loan costs
2. Loan costs must be disclosed three business days after receiving an application and before any fees are collected. (Reasonable fee may be collected to get credit history.)
3. Creditors must wait seven business days after providing loan costs before closing the loan
4. If APR (Annual Percentage Rate) increased more than 0.125 percent from the initially disclosed rate, the lender must disclose the amount and wait an additional three business days before closing the loan.

Further Reading:
Federal Reserve Press Release
Federal Reserve - Rules and Regulations (17 page PDF)
Los Angeles Times - New federal rules protecting applicants for home loans take effect July 30

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