Changes In The Truth In Lending Act
The truth in lending act goes back to 1968 and serves as protection for consumers requiring clear and full disclosure of the terms in relation to all credit transactions, especially on all involved costs. Loan officers and mortgage brokers who remain on top of regulations will be able to plan these changes, but it is necessary that you know them as well, specifically if you want to make sure everything in your loan process goes as smoothly as possible.
Changes in the Truth in Lending act are primarily on the new disclosure requirements for the mortgage loan applied by the consumer. The Federal Reserve Truth in Lending Regulation employs its modified laws for loans submitted and filed since July 30 of last year. Many lenders find the altered version a bit challenging and complicated, mostly causing delays for the allegedly fast transaction between sellers and buyers.
Below are some major changes included in the July 30, 2009 TILA update:
1. Imposed Limitations in Fee Collection - mortgage lenders are not allowed to collect fees from consumers in excess of the fees needed to cover the cost of obtaining borrower credit history until the consumer has reviewed the truth in lending paperwork. The paperwork involves but is not limited to the information as part of the good faith estimate, which divulges the yearly percentage rate of your loan, finance charges, amount financed and the total payments you have to make. This is also provided on refinance mortgages.
2. Effectivity of the 7-day waiting period - for mortgage operations, business days are from Monday to Saturday. Home mortgages are not allowed to close before seven days after a borrower receives the TIL.
3. Basically, you are not obliged to close your loan just because you receive disclosure documents or signed a mortgage application. This will prevent lenders from pressuring you into signing anything. Do not sign on a deal if you are unsure of it.
4. Effectivity of the new annual percentage rate change of waiting period - in the event an APR changes, a three-day waiting period is tacked on before a loan can be closed. This means that if you quoted one APR, and then it changes for whatever reason, the lender is required to wait for additional three days after you received the changed paperwork before they can close your loan. Every time the APR changes, another three-day waiting period will become effective.
Overall, such changes are meant to give borrowers with added protection from mortgage fraud. However, you must not only rely on these regulations. Always ask for a clarification and up-front disclosure from your mortgage broker. Once the deal is done, the obligation falls on you to read your mortgage documents and decide whether the deal is comprehensible to you or not.
There were complaints about the new Truth in Lending act. Several lenders believe that it will only delay the closing time and can probably cause further cost on the part of the borrower. Nevertheless, it is necessary that lenders should follow the rules otherwise are held accountable for the violations.
The revised Truth in Lending Act is relevant to all kinds of mortgage. Lenders in all states are currently observing it. As a consumer, you should be aware of these revisions. As indicated above, it may affect the costs of acquiring a loan. Understanding the consequence of the act will help ascertain what you are required before committing to anything.
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