What to Expect with Recent Changes to Mortgage Lending Laws

What in the world is Regulation Z?  Regulation Z refers to Title I of the Consumer Protection Act, specifically the Truth in Lending Act (“TILA”). It is the law that governs how, what and when a lender discloses to their applicant, the true cost of borrowing.  Regulation Z has been around for some time but as of July 30, 2009 there were significant changes thanks to the Mortgage Disclosure Improvement Act (“MDIA”).

At the top of the list of those changes are mortgage disclosures. The MDIA amended the TILA to require that a creditor provide early good faith estimates of TILA disclosures for all real-estate-covered loans to be secured by any dwelling of a consumer.

• The early disclosures must be delivered or placed in the mail not later than three business days after a creditor receives the loan application and at least seven business days before consummation of the transaction. The MDIA Rule incorporates these changes into Regulation Z.
• This rule was designed to assist consumers with appropriately shopping for a loan and allowing the consumer to do so free of any charges such as application fees.

Prior to closing the loan, a lender must provide a final Truth in Lending document detailing all final fees.

• Previously this was handled at closing; now it is required three business days in advance of the loan closing.
• If the lender is off by more than .125% in the final Annual Percentage Rate disclosure, then a mandatory three business day period is established upon corrected documents being provided under the ruling. 

These are only some of the changes.  What does this all mean?  It means that rushed closings are a thing of the past.  In order to meet closing deadlines, lenders are going to need to establish sufficient time to process and close the loan in accordance with regulations and changing deadlines are no longer an acceptable practice. At your Credit Union, we have always allowed enough time for our members to fully understand the meaning of their loan documents before they sign on the line. This process typically takes 20 to 30 days.

As your financial resource, New Mexico Educators Federal Credit Union wants to fully disclose the process and establish an appropriate set of expectations with regard to your most important investment…..your home. If you have any questions concerning Regulation Z, you can email us at mortgage@nmefcu.org.