There’s been a lot of attention focused on recent regulatory changes in the mortgage industry. And although we’ve heard that the impact can be significant on consumers, it’s important to understand exactly how this affects home buying and home refinancing consumers.
Here is a summary of what it all means: the Mortgage Disclosure Improvement Act is designed to ensure that consumers receive cost disclosures early in the mortgage process. It requires creditors to give good faith estimates of mortgage loan costs (early disclosures) within three business days after receiving a consumer's application for a mortgage loan and before any fees are collected from the consumer, other than a reasonable fee for obtaining the consumer's credit history.
These requirements are consistent with the Federal Reserve Board's July 2008 final rule, which applied to loans secured by a consumer's principal dwelling. The Mortgage Disclosure Improvement Act broadens this requirement by also requiring early disclosures for loans secured by dwellings other than the consumer's principal dwelling, such as a second home.
New requirements for lenders are as follows:
* Creditors must wait seven business days after providing the borrower with early disclosures before they close on the loan. The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.
* Creditors provide new disclosures with a revised annual percentage rate (APR)
* If a change occurs If the annual percentage rate (APR) changes by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan that makes the APR in the early disclosures inaccurate beyond a specified tolerance.
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