Requirements Truth In Lending Regulation Z

HistoryHistory The FRB (Federal Reserve Board) passed a final ruling which amends Regulation Z, the Truth In Lending Act This is put into practice as the Mortgage Disclosure Improvement Act (MDIA) Several issues played a part in the implementation process Insures that everyone works with the same standards

New Amendments and Regulations 1.New disclosure requirements 2.Restrictions on fees collected up front 3.Waiting periods are enforced from disclosure date 4.New requirements for APR variances Compliance with these new regulations and amendments is required for all loan applications and/or locked loans on or after August 1, 2009.

Most Significant Changes APR variances: changes by +/ % or more, closing will be delayed Allow 6 days if applied by mail; 3 days if applied in person or electronically ( /fax) Re-disclose anytime there is a lock modification (GFE & TIL)

Most Significant Changes (Cont) A loan may not close prior to 7 days from the initial disclosures are sent to the borrower (min of 7 days to close) Truth In Lending is required on all loans Only a bona fide credit report fee may be paid at the time the initial disclosures are provided to the borrower (exception: in person applicationall appropriate fees may be collected at the time of application)

APR Variance Thresholds Increases/decreases in APR of: +/ % for a regular transaction +/ % for an irregular transaction (ARM, irregular payment periods, irregular payment amount) If, at the time of closing, the APR has increased/decreased from the most recent disclosure, by +/ %, you must re- disclose and delay closing.

APR Variance Thresholds (cont) Waiting period of 6 business days is required from the time the new disclosures are provided. 3 days may be permitted only if the disclosures were provided in person or electronically ( or fax) and dated by the borrower. Borrowers must sign the returned copy of disclosures.

APR Variances-Waiting Periods APR Variances-Waiting Periods Mail Re-Disclosures (3 days in mail/3 days re-disclosed) Re-Disclosure Sent: Monday Tuesday Wednesday Thursday Friday Saturday Earliest Closing Date: Following Monday Following Tuesday Following Wednesday Following Thursday Following Friday Following Saturday Re-Disclosure Sent: Monday Tuesday Wednesday Thursday Friday Saturday Earliest Closing Date: Following Monday Following Tuesday Following Wednesday Following Thursday Following Friday Following Saturday

APR Variances-Waiting Periods APR Variances-Waiting Periods In Person/Electronic Re-Disclosures (3 days re-disclose) Re-Disclosure Sent: Monday Tuesday Wednesday Thursday Friday Saturday Earliest Closing Date: Earliest Closing Date: Thursday Friday Saturday Monday Tuesday Wednesday Re-Disclosure Sent: Monday Tuesday Wednesday Thursday Friday Saturday Earliest Closing Date: Earliest Closing Date: Thursday Friday Saturday Monday Tuesday Wednesday If electronic, you must have borrowers permission to accept electronic re-disclosure. Must document permission with or fax confirmation.

Waiting Period: Application to Closing Waiting Period: Application to Closing A loan may not close prior to 7 business days from the date the initial disclosures are sent to the borrower. Earliest Disclosures Sent: Monday Tuesday Wednesday Thursday Friday Saturday Earliest Closing Date: Earliest Closing Date: Following Tuesday Following Wednesday Following Thursday Following Friday Following Monday Earliest Disclosures Sent: Monday Tuesday Wednesday Thursday Friday Saturday Earliest Closing Date: Earliest Closing Date: Following Tuesday Following Wednesday Following Thursday Following Friday Following Monday

Preparation of TIL Disclosures provided at Lock is most important BEFORE: this has not been an issue, the final TIL was the critical document NOW: any mistake on the TIL prepared at lock can delay closing! Final check on the APR will not be completed until closing; crucial to be well versed on the correct preparation of TIL

Preparation of TIL (cont) If seller is paying closing costs, include all costs on the buyers side, indicate a lump sum credit, and show on the GFE. Insure you are using the most current revision of the TIL. Must be included in the FED box: You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.

Finance Charges vs. Fees Finance Charges are costs associated with the mortgage loan process that impact the APR If a seller is paying closing costs, include all costs on the buyers side and indicate a lump sum credit. These costs must be shown on the GFE. Required FED Box Language: You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.

Finance Charges These are considered in the APR calculation Origination Fee Discount Fee Underwriting Fee Administration Fee Processing Fee Doc Prep Fee Flood Certificate Fee Tax Service Fee VA Funding Fee MIP/PMI/MERS Application Fee Prepaid Interest Attorneys Fees Verification Fees Notary Fees Overnight/Junk Fees

Fees These are NOT considered in the APR calculation. Appraisal Credit Report Title Insurance Fees Survey Recording Termite Inspection Homeowners Insurance Escrows for T and I Real Estate Tax payments Payoff of mortgages or other debts

TIL Required on ALL Loan Types In the past, TIL was not required initially on refinances or investment properties. Exception: Home Equity Line of Credit VHDA disclosures must be provided for the 1 st and 2 nd mortgages, separately.

Avoid Closing Delays How the APR on a TIL could increase/decrease 0.125% Notify if points change Correct monthly PMI disclosed Correct VA Funding Fee Correct per diem interest days Correct fees included in finance charges (influence APR) Judgment fees Taxes Attorney ancillary fees not included (courier, faxes, copies)

Avoid Closing Delays (cont) How the APR on a TIL could increase/decrease 0.125% Attorney fees disclosed to lender early (see schedule of fees) BE PROACTIVE! Correct Fees: contact attorney/title company for exact fees. All disclosures given Rates locked Correct payoffs Bottom Line: Good Communication!

Possible Pitfalls The 6 business day clock begins ticking once the disclosures are provided to the borrowers Reduce timeframe to 3 business days by hand delivering or by electronic means. Signed confirmation required. Coordination must occur between the loan officer and the agent: who will prepare and deliver the re-disclosures to the borrower? An accurate TIL must be prepared at the time of lock-In.

Possible Pitfalls (cont) Most important not to under disclose due to competition: could impact closing date An increase/decrease of 0.125% in the APR from the most recently disclosed APR to the calculated APR at closing will require a waiting period of up to 6 business days. *You may not find this out until the day of closing! If an application is taken other than in person, only the credit report fee may be collected at the time of application. *This will have an impact on receipt of appraisal, reservation fees, etc.

Q&As When do the disclosure requirements begin? All applications taken on or after August 1, 2009 must comply All lock ins on or after August 1, 2009 require re- disclosure & 6 day (or 3 day) waiting period applies Are all loan programs impacted by this regulation? Yes, with the exception of a HELOC loan.

Q&As What if the borrower is relocking and the points and/or rates are lower? Re-disclosure is still required to determine the accurate APR If the APR decreases from the most recently disclosed APR

Q&As If the APR is over the 0.125% tolerance, when will I know this? The final check is immediately prior to closing---the Loan Officer will advise Therefore, the attorney fees must be disclosed as quickly as possible so the TIL can analyzed carefully prior to submission to Underwriting.

Q&As The borrower is very upset….is there a waiver to avoid a delay in closing? No A case has just been transferred to Old Virginia Mortgage with a closing date within 4 days. Can this happen? I locked the loan at the face to face application. No, there are no exceptions to the 7 day waiting period.

Q&As Why was this regulation enacted? To insure the interim disclosures mirror the disclosures signed at closing If a discrepancy is noted, the process will be slowed down and the borrower will not feel pressured to close immediately.

Q&As The borrower applied by mail and understands the 7 day timeframe for disclosure. Can we shorten the timeframe for re-disclosure purposes, i.e.: by or fax? To shorten the 6 day timeframe, an or fax from borrower confirming the receipt of the document may initiate the 3 day timeframe. The must be documented by a direct or fax by the borrower. A read receipt or fax confirmation is not acceptable. No loans can close earlier than 7 days from application.

Q&As Do the before mentioned timeframes have an impact on the three day requirement from application to provide the initial GFE and TIL? No, the 3 day requirement is still in effect.

What an Agent needs to know Ensure you have the most current TIL version and the following language in the Fed Box: You are not required to complete this agreement because you have received these disclosures or signed a loan application. Understand that a loan may not close prior to 7 business days after the time of application.

What an Agent needs to know (cont) Understand that a loan may not close prior to 6 business days after the time of the initial lock or re-lock Every time a loan is relocked, new disclosures must be provided to the borrower and waiting period must elapse before closing.

What an Agent needs to know (cont) Timely and accurate disclosures must be provided Indicate on your TIL, the method of delivery (hand delivered, fax, ) Understand the collection of fees Only face to face applications permit collection of fees. All other types of applications (by mail, phone, , fax) require the borrower to first receive the initial disclosures before fees may be collected (exception: credit report fees)

Thank You… For taking the time to learn how you can help loans close on time. Your clients need to know that we are a team and we will do whatever it takes to make the loan process seamless. Please contact us if we can help with anything in the future. 621 Lynnhaven Pkwy, Suite 160 * VB, VA *