Requirements

Truth In Lending

Regulation Z

Truth In Lending

Regulation Z

www.oldvamortgage.com

HistoryHistory The FRB (Federal Reserve Board) passed a final

ruling which amends Regulation Z, the Truth In Lending Act

This is put into practice as the Mortgage Disclosure Improvement Act (MDIA)

Several issues played a part in the implementation process

Insures that everyone works with the same standards

New Amendments and RegulationsNew Amendments and Regulations

1. New disclosure requirements2. Restrictions on fees collected up front3. Waiting periods are enforced from disclosure

date4. New requirements for APR variances

Compliance with these new regulations and amendments is required for all loan applications and/or locked loans on or after August 1, 2009.

Most Significant ChangesMost Significant Changes

APR variances: changes by +/- 0.125% or more, closing will be delayed

Allow 6 days if applied by mail; 3 days if applied in person or electronically (email/fax)

Re-disclose anytime there is a lock modification (GFE & TIL)

Most Significant Changes (Con’t)Most Significant Changes (Con’t)

A loan may not close prior to 7 days from the initial disclosures are sent to the borrower (min of 7 days to close)

Truth In Lending is required on all loans Only a bona fide credit report fee may be paid

at the time the initial disclosures are provided to the borrower (exception: in person application—all appropriate fees may be collected at the time of application)

APR Variance ThresholdsAPR Variance Thresholds Increases/decreases in APR of:

+/- 0.125% for a regular transaction +/- 0.125% for an irregular transaction (ARM,

irregular payment periods, irregular payment amount)

If, at the time of closing, the APR has increased/decreased from the most recent disclosure, by +/- 0.125%, you must re-disclose and delay closing.

APR Variance Thresholds (con’t)APR Variance Thresholds (con’t)

Waiting period of 6 business days is required from the time the new disclosures are provided. 3 days may be permitted only if the disclosures

were provided in person or electronically (email or fax) and dated by the borrower.

Borrowers must sign the returned copy of disclosures.

APR Variances-Waiting PeriodsAPR Variances-Waiting PeriodsMail Re-Disclosures

(3 days in mail/3 days re-disclosed)

APR Variances-Waiting PeriodsAPR Variances-Waiting PeriodsIn Person/Electronic Re-Disclosures

(3 days re-disclose)

If electronic, you must have borrower’s permission to accept electronic re-disclosure. Must document permission with email or fax confirmation.

Waiting Period: Application to ClosingWaiting Period: Application to ClosingA loan may not close prior to 7 business days from the date the initial

disclosures are sent to the borrower.

Preparation of TILPreparation of TIL

Disclosures provided at Lock is most important BEFORE: this has not been an issue, the final TIL

was the critical document NOW: any mistake on the TIL prepared at lock can

delay closing! Final check on the APR will not be completed

until closing; crucial to be well versed on the correct preparation of TIL

Preparation of TIL (con’t)Preparation of TIL (con’t)

If seller is paying closing costs, include all costs on the buyers side, indicate a lump sum credit, and show on the GFE.

Insure you are using the most current revision of the TIL.

Must be included in the FED box: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

Finance Charges vs. FeesFinance Charges vs. Fees Finance Charges are costs associated with the

mortgage loan process that impact the APR If a seller is paying closing costs, include all costs

on the buyers side and indicate a lump sum credit. These costs must be shown on the GFE.

Required FED Box Language: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

Finance ChargesFinance ChargesThese are considered in the APR calculationThese are considered in the APR calculation

FeesFeesThese are NOT considered in the APR calculation.These are NOT considered in the APR calculation.

TIL Required on ALL Loan TypesTIL Required on ALL Loan Types

In the past, TIL was not required initially on refinances or investment properties.

Exception: Home Equity Line of Credit VHDA disclosures must be provided for the 1st

and 2nd mortgages, separately.

Avoid Closing DelaysAvoid Closing Delays How the APR on a TIL could increase/decrease

0.125% Notify if points change Correct monthly PMI disclosed Correct VA Funding Fee Correct per diem interest days Correct fees included in finance charges (influence APR)

Judgment fees Taxes Attorney ancillary fees not included (courier, faxes, copies)

Avoid Closing Delays (con’t)Avoid Closing Delays (con’t) How the APR on a TIL could increase/decrease

0.125% Attorney fees disclosed to lender early (see schedule of

fees) BE PROACTIVE! Correct Fees: contact attorney/title company for exact

fees. All disclosures given Rates locked Correct payoffs Bottom Line: Good Communication!

Possible PitfallsPossible Pitfalls

The 6 business day clock begins ticking once the disclosures are provided to the borrowers Reduce timeframe to 3 business days by hand

delivering or by electronic means. Signed confirmation required.

Coordination must occur between the loan officer and the agent: who will prepare and deliver the re-disclosures to the borrower?

An accurate TIL must be prepared at the time of lock-In.

Possible Pitfalls (con’t)Possible Pitfalls (con’t) Most important not to “under” disclose due to

competition: could impact closing date An increase/decrease of 0.125% in the APR from

the most recently disclosed APR to the calculated APR at closing will require a “waiting period” of up to 6 business days. *You may not find this out until the day of closing!

If an application is taken other than in person, only the credit report fee may be collected at the time of application. *This will have an impact on receipt of appraisal, reservation fees, etc.

Q&AsQ&As

When do the disclosure requirements begin? All applications taken on or after August 1, 2009

must comply All lock ins on or after August 1, 2009 require re-

disclosure & 6 day (or 3 day) waiting period applies Are all loan programs impacted by this

regulation? Yes, with the exception of a HELOC loan.

Q&AsQ&As

What if the borrower is relocking and the points and/or rates are lower? Re-disclosure is still required to determine the

accurate APR If the APR decreases from the most recently

disclosed APR

Q&AsQ&As

If the APR is over the 0.125% tolerance, when will I know this? The final check is immediately prior to closing---the

Loan Officer will advise Therefore, the attorney fees must be disclosed as

quickly as possible so the TIL can analyzed carefully prior to submission to Underwriting.

Q&AsQ&As

The borrower is very upset….is there a waiver to avoid a delay in closing? No

A case has just been transferred to Old Virginia Mortgage with a closing date within 4 days. Can this happen? I locked the loan at the face to face application. No, there are no exceptions to the 7 day waiting

period.

Q&AsQ&As

Why was this regulation enacted? To insure the interim disclosures mirror the

disclosures signed at closing If a discrepancy is noted, the process will be

“slowed down” and the borrower will not feel pressured to close immediately.

Q&AsQ&As The borrower applied by mail and understands

the 7 day timeframe for disclosure. Can we shorten the timeframe for re-disclosure purposes, i.e.: by email or fax? To shorten the 6 day timeframe, an email or fax from

borrower confirming the receipt of the document may initiate the 3 day timeframe.

The must be documented by a direct email or fax by the borrower. A “read receipt” or fax confirmation is not acceptable.

No loans can close earlier than 7 days from application.

Q&AsQ&As

Do the before mentioned timeframes have an impact on the three day requirement from application to provide the initial GFE and TIL? No, the 3 day requirement is still in effect.

What an Agent needs to knowWhat an Agent needs to know

Ensure you have the most current TIL version and the following language in the Fed Box: “You are not required to complete this agreement

because you have received these disclosures or signed a loan application.”

Understand that a loan may not close prior to 7 business days after the time of application.

What an Agent needs to know (con’t)What an Agent needs to know (con’t)

Understand that a loan may not close prior to 6 business days after the time of the initial lock or re-lock

Every time a loan is relocked, new disclosures must be provided to the borrower and waiting period must elapse before closing.

What an Agent needs to know (con’t)What an Agent needs to know (con’t)

Timely and accurate disclosures must be provided Indicate on your TIL, the method of delivery (hand

delivered, fax, email) Understand the collection of fees

Only face to face applications permit collection of fees. All other types of applications (by mail, phone, email, fax) require the borrower to first receive the initial disclosures before fees may be collected (exception: credit report fees)

Thank You…Thank You…

For taking the time to learn how you can help loans close on time. Your clients need to know that we are a team and we will do whatever it takes to make the loan process seamless. Please contact us if we can help with anything in the future.

621 Lynnhaven Pkwy, Suite 160 * VB, VA 23452757.605-0500 * www.oldvamortgage.com