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Mortgage Disclosure Act

July 6, 2009

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 of disclosures will apply.  One of the new requirements is that the borrower must be provided with an accurate APR 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 (TIL) statement must be provided no later than 3 business days after receipt of the loan application. 

 

  • 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 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 of a percent (1/4 percent for construction loans).

 

If the final loan terms cause the TIL/APR top be understated by more than 1/8th of a percent, a revised TIL with an accurate APR must be provided to the borrower, so that 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 that day.

 

Some issues to consider:

These new timing requirements limit mortgage companies’ ability to accommodate rush closings, and they could delay closings.

 

For loans where the final loan terms increase the APR by more than 1/8th of a percent, a revised TIL is required to be received by the borrower at least 3 business days prior to closing.  This means closing table changes may result in having to reschedule the closing date.

Patty Cunningham, Realtor®                                                   390 Waterloo Blvd, Suite 101
Coldwell Banker Preferred                                                 Exton, PA 19341
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