New Regulation Z Rules
This is from Jeff McClatchy @ Fidelity Bank - for more information - contact Jeff directly @ 940.763.2100
INDUSTRY UPDATE
New Regulation Z Rules Effective July 30, 20O9
The Federal Reserve has approved new rules concerning Regulation Z / Truth in Lending (TIL)
disclosures which go into effect on July 30, 2009 for ALL loan applications. The rules apply to
all mortgage lenders including brokers, bankers, wholesalers, federal or state banks and
credit unions.
In summary:
• Prior to issuance of the three-day disclosures, ONLY a credit report fee can be collected up
front. No other fees may be collected until AFTER the initial disclosures are issued.
• A new statement will be added to both the initial and final disclosure that states, "You are
not required to complete this agreement merely because you have received these disclosures or
signed a loan application."
• There is a MANDATORY seven business day (all days except Sunday and holidays)
waiting period from the time the initial TIL is issued to the time of closing. For example,
if the loan application is taken on Monday and the disclosures aren't issued to the borrower until
Wednesday, the loan cannot close until the following Thursday. The option to transfer a loan from
another lender one day and close it the next day has been prohibited.
• If the final TIL changes from the initial TIL (primarily meaning the APR changes by 1/8% up or
down), there is a MANDATORY three business day waiting period from the time the new
TIL is received by the borrower to when the loan can close. If the new TIL is mailed, then it
is a MANDATORY six business day waiting period.
• The new rules apply to owner-occupied purchases, refinances, second homes and
home equity loans. They do not apply to non-owner-occupied properties or home equity lines
of credit (HELOC).
Lenders must allow adequate time for locks; and ensure fees are accurate at the beginning of the
loan application; and items which impact the APR (i.e., fees, loan amount, interest rates) do not
change during the loan transaction. Additionally, short close contracts (less than seven days)
cannot be written.
Fines and penalties for violating the regulations include:
• Civil liability (lawsuits)
• Criminal liability ($5,000 and up to one year in jail)
• Administration actions (cease and desist orders)
• Possible forgiveness of the debt to the borrower
To review the regulations, visit:
www.federalreserve.gov/newsevents/press/bcreg/20090508a.htm
