Reg Z. Being Better Informed on how the Feds are Keeping You Better Informed
by Evan Vanderwey on 20/08/09 at 7:12 pm
Helpful? Inconvenient? The new Truth In Lending Act (Reg Z) regulations are probably a little of both.
If you’re buying a home or refinancing after July 30 of this year, things just got a little more complicated. But don’t worry—it’s all intended for your good. Broadly speaking, the Federal Reserve Board is trying to help you be better informed. Specifically, it hopes to:
- Improve the disclosure of your loan’s APR to better capture fees and settlement costs
- Require lenders to show how your APR compares to the average rate for borrowers with excellent credit
- Require lenders to provide final Truth in Lending Act disclosures so that you receive them at least three business days before loan closing
- Require lenders to show how much your monthly payments might increase for adjustable-rate mortgages
- Prohibit payments to a mortgage broker or a loan officer that are based on your loan’s interest rate or other terms
- Prohibit a mortgage broker or loan officer from “steering” you toward transactions that are not in your best interest in order to increase compensation
For you, the consumer, these are good protections. But keep that in mind when these protections come to you (primarily) in the form of processing-time requirements, some of which may try your patience…
- Lenders must provide estimates of mortgage loan costs within 3 business days of the application. This is called early disclosure. No fees (except a reasonable fee for a credit report) may be collected before disclosure.
- A 5-day period after application must elapse before appraisal costs can be collected.
- A 7-day waiting period is required between early disclosure and closing.
- An additional 3-day period must be added before closing if APR changes by more than an eighth of a percent.
- A 4-day period is required between the day the appraisal is given to the borrower and closing.
It may look to you more inconvenient than it actually is. Many of these requirements overlap each other, so the process isn’t lengthened all that much. But if looks complicated, you’re right—it is. But your loan officer should know these ins and outs well (it’s in my best interest since I’m the one on the hook if I screw up).
Either way, it’s helpful to the whole process if you’re better informed on how the Feds are keeping you better informed.
