What Every Borrower Needs to Know About the Latest Truth in Lending Act (TILA) Changes

One of the things I’m most happy to educate mortgage borrowers about are the protections put in place to make sure their lending experience goes as it should.  As such, I wanted to address one of the most powerful protections in place today – the Truth in Lending Act (TILA).

The history of the Truth in Lending Act (TILA) goes back back more than 40 years to 1968, where it was put into place as a protection for consumers requiring full and clear disclosure of the terms related to credit transactions – including all costs involved.

The Housing and Economic Recovery Act of 2008 put some key changes to the TILA into action  – with them taking hold this past July 30, 2009.  Some of these changes may not be immediately evident to you as a borrower.  However, there are a few that change the way key processes are put into place, and some that might impact when your mortgage loan closes.

What Changes Were Put Into Place?

Here are some of the main changes included in the July 30, 2009 TILA update:

1. Fee Collection Limitations Imposed: Your mortgage broker is not allowed to collect fees from you in excess of those fees required to cover the cost of obtaining your credit history, until you have reviewed the Truth-in-Lending (TIL) paperwork.

This paperwork includes, but is not limited to, the information found as part of the Good Faith Estimate (GFE) – which discloses your loan’s annual percentage rate (APR), finance charges, the amount financed, and the total payments you’re required to make. TILs must also be provided when you refinance your home.

2. 7 Day Waiting Period in Effect: Your home loan is not allowed to close until 7 business days after you have received the TIL. For mortgage transactions, business days run from Monday to Saturday.

3. A “You’re Not Committed” Statement has Been Added: Basically, you’re not obligated to close the loan just because you’ve received disclosure documents or have signed a mortgage application. Don’t let mortgage brokers or your bank pressure you into moving ahead with your home loan if you feel you just aren’t ready to do so.  If you don’t feel right about the deal, back away. Period.

4. New APR Change Waiting Period is in Effect: If the APR changes, a 3 day waiting period is tacked on before the loan can close. If you are quoted one APR, and then that APR changes for any reason, then the lender is required to wait an additional 3 days after you’ve received the revised paperwork before they can close the loan.  Any time the APR changes (which is hopefully not often at all), another 3 day waiting period goes into effect.

Overall, these changes are meant to provide you some added protections. In a perfect world, a handshake would seal a mortgage deal.  However, the times today are what they are.

Always require full disclosure and complete transparency from your mortgage broker. Once it’s delivered, the obligation then falls on you to read through your loan documents and decide whether the deal makes sense to you or not.

I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 888-859-7418 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!