The Veridian Blog

The most significant and radical change pertaining to the Truth in Lending form (“TIL”) was recently put into effect via the Housing and Economic Recovery Act (“HERA”).  It has little to do with the form itself, rather, the timing and enforcement of TIL disclosure is now a big concern amongst lenders and borrowers.  Since July 30, 2009, these changes in the lending process are now strictly enforced:

1.      Upfront fees cannot be charged until the borrower receives the initial TIL from the lender with the lone exception being a credit report fee.  The big issue here is the appraisal.  If it takes a week before the borrower is allowed to foot the appraisal bill, then who ends up paying in order to avoid lengthy delays in the process?  Yup, so far it’s been the broker.

2.      An initial TIL is now required on all purchases and refinances of primary residences and second homes.  That just leaves disclosures for investment properties as the only exception.

3.      An initial TIL must be provided at least seven days before the close/sign date.  Not a huge impact, since who closes loans in 7 days anymore?

4.      An increase in Annual Percentage Rate by more than 0.125% requires re-disclosure of the TIL at least 3 business days before closing.  If mailed, the TIL is considered “received” 3 business days after mailing.  This is the most potentially damaging rule.  Any change in APR resulting from new/revised fees or changes in loan amounts and/or interest rate will trigger another APR review.  If the difference is more than 1/8^th of the initial disclosure rate, then a mandatory 3-day review period must pass prior to closing or signing.  APR must be followed diligently or else it may cause an aggravating and costly delay.

The reasons behind HERA aren’t anything new to what brokers have heard since the mortgage implosion began, including the push to create a more transparent, informative and fair regulation, to prevent deceptive and abusive lending practices and to protect borrowers against such practices.  The TIL form has always been a confusing document that more often than not hurts more than helps to make the borrowing process more efficient.