On July 30, 2009, new amendments to the Truth In Lending Act (TILA)will go into effect. They require all mortgage lenders and mortgage brokers to help prevent deceptive lending practices and protect customers by helping them become more informed.
Most of the changes will be very important to the Homebuyers, Real Estate Agents, Builders, and Settlement Agents. It means that we all need to prepare for this impact, the process and time lines for mortgage financing, because it could impact closing dates.
Right now Homebuyers and sellers can still agree on a closing date, and then service providers – including lenders – will work as best they can toward meeting that date.
Mandatory 7 days waiting period is required.
With the new regulations, purchase contracts can still be written with a specific closing date in mind, but all parties need to take into account that the earliest time any home purchase transaction can close is 7 business days after the homebuyer is issued his or her initial mortgage disclosures from the lender.
What is considered a business day
A Business Day is defined as a calendar day except Sunday and legal public holidays (New Year's Day, MLK Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, and Christmas Day)
With new regulations upfront fees cannot be collected by the lender (except for a credit report fee) until the initial disclosures are received. If the disclosure is mailed, fees can not be collected 3 days after mailing. If the disclosures are overnighted, they are considered “received” the next business day—(excluding Sundays and Federal Holidays) allowing the fees to be collected on the following business day after shipping. If the disclosure is issued in person, fees can be collected immediately.
The homebuyer must receive a copy of his or her appraisal a minimum of 3 business days prior to closing.
Revised disclosure and waiting period
An increase of more than .125% in the Annual Percentage Rate (APR) from the initial APR, the Truth in Lending Disclosure (TIL) requires the TIL disclosure to be revised and reissued to the homebuyer. The homebuyer must receive a revised TIL disclosure at least 3 business days before closing, providing the homebuyer with the time required to determine if the homebuyer is comfortable with his or her loan choice. If mailed, the TIL disclosure is considered “received” 3 business days after mailing. It means that this will add an additional 7 business days to the timing.
If the change is less than .125%, then no re-disclosure is required.
It is wise though, to plan on a minimum of 30 days to close, as well as to lock in the rate and fees as soon as possible.