New rules protecting home loans effective July 30
New rules that revise the disclosure requirements for mortgage loans under Regulation Z (Truth in Lending) go into effect tomorrow. The revisions implement the Mortgage Disclosure Improvement Act (MDIA), which was enacted in July 2008 as an amendment to the Truth in Lending Act (TILA). It is possible that these new requirements may cause delays in getting loans, and agents should be careful to plan for this when their clients are deciding close of escrow dates.

The MDIA requires creditors to give good faith estimates of mortgage loan costs ("early disclosures") within three business days after receiving a consumer's application for a mortgage loan and before any fees are collected from the consumer, other than a reasonable fee for obtaining the consumer's credit history, according to information from the Federal Reserve. The MDIA also requires early disclosures for loans secured by dwellings other than the consumer's principal dwelling, such as a second home.

In addition, the rules would implement the MDIA's requirements that creditors wait seven business days after they provide the early disclosures before closing the loan; and that creditors provide new disclosures with a revised annual percentage rate (APR), and wait an additional three business days before closing the loan, if a change occurs that makes the APR in the early disclosures inaccurate beyond a specified tolerance, according to the Federal Reserve. The rules also would permit a consumer to expedite the closing to address a personal financial emergency, such as a foreclosure.

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