The rules that lenders have to follow are complex. And starting July 30, 2009 those rules get even more complex. Lenders will be subject to new Truth In Lending Act (TILA) disclosure requirements. This could affect home buyers and sellers, their Realtors and people trying to refinance a home by causing delays. And while this is not as big a deal as SB 1271, it is worth taking a look at. Here are the basics:
1. Only applies to a borrower’s home. Investment properties are exempt.
2. Lender has 3 days from loan application to supply a Good Faith Estimate (GFE).
3. Lender may not charge any fees (except for credit report) prior to GFE.
4. Mandatory 7 day waiting period between GFE and closing date.
5. If Annual Percentage Rate (APR) goes up more than 0.125% lender must issue new GFE.
6. If a new GFE is issued there is another 3 day waiting period.
The borrower can have these waiting periods waived if there is a financial or personal emergency. But the borrower must receive these disclosures no later than the time of the modification or waiver.
From the perspective of someone buying or selling a home (or a Realtor), delays in closing can cause serious headaches. Yet delays in Arizona real estate closings are already more common that one might think. We don’t need more things that will cause delays. These new TILA disclosure requirements were created with the best of intentions. Hopefully they will cause more good than harm.
I recently had first hand experience with a delay. The lender said it was because they are so backed up right now at Bank of America.
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