The Federal Reserve Board recently amended Regulation Z to conform to the requirements of the Mortgage Disclosure Improvement Act of 2008. The purpose of this amendment is to let consumers to know, prior to closing, what their closing fees and charges will be. These changes are good for borrowers, but if you are not prepared, issues may arise during your closing that could impact your closing date. This amendment applies to primary and vacation homes. It also does not allow a lender to charge any fees, other than for a credit check for a consumer prior to the consumer being provided with the initial Truth-in-Lending Disclosure.
- A lender must provide a good faith estimate within three business days after receiving a buyer's application for a mortgage. Business days include Monday - Saturday, excluding Sundays and legal holidays.
- A lender must wait seven business days after providing the good faith estimate before a closing can take place.
- If a lender needs to make more than a minor change to the APR, defined as any change more than 1/8%, the lender must provide new disclosures to the buyer no later than three business days before closing.
- A buyer can waive these waiting periods only for a personal financial emergency.
Below is a list of items you can do to help prevent any mishaps. - Schedule to have a longer closing. This may become standard while everybody gets used to the changes. Plan for a few extra days.
- Become familiar with the fees that affect the APR, there can be other fees as well, so be sure to talk to your loan officer about this. Your Good Faith Estimate will indicate whether a fee is being calculated as a Prepaid Finance Charge. If you notice that some fees are not marked that should be marked, contact your lender immediately.
- Watch your interest rate. Almost any change to your interest rate will trigger an APR change of more than .125% which would then require an new re-disclosure
This Week's Real Estate Insight: While the mortgage loan originator is responsible for complying with the above dates, Consumers and REALTORS should pay attention to contingency and closing dates. If the lender revises APR too close to the closing, the closing date will need to be postponed to allow for the required review. If the closing date is "time is of the essence" for either the buyer or the seller, make sure to keep track of the mortgage loan originator to avoid delays. ?
