New Home Loan Rules Will Take Effect on July 30, 2009


If you are in the process of buying a new primary residence or second home, or considering refinancing a loan, a new set of federal consumer protection rules taking effect on July 30th, 2009 may affect you.  These rules are a part of the Mortgage Disclosure Improvement Act of 2008, and they are designed to give consumers more disclosure of the cost of a loan and also more time to make a decision.  The final rules from the Federal Reserve were modified recently and here is a quick summary.

Early disclosures are required within three business days - Good faith estimates of mortgage loan costs must be given to a consumer within three business days of a consumer's loan application.  Also, no fees may be collected besides a reasonable credit check fee.  This means that the good faith estimate needs to be given before the lender collects an application or appraisal fee. In the past it was common for lenders to collect  hundreds of dollars in fees before providing any cost estimates. 

Creditors must wait seven business days to close a loan after early disclosures - This gives the consumer at least seven days to decide whether to close or not upon receiving the initial estimate.  Currently it is common for disclosures to be provided less than 24 hours before closing.

Revised disclosures must be provided if loan interest terms change - The new rule states that if the final annual percentage rate of the loan differs from the original disclosure by more than 1/8th of a percent, a new disclosure must be provided and the lender has to wait another three days until closing.  Once again this will give the consumer more time to decide whether or not to take the loan.  The rules do permit a consumer to voluntarily close the loan sooner if there is a financial emergency, but the lender cannot force the consumer to close sooner.

Appraisal reports must be delivered to consumer three business days before closing - Currently consumers have the right to request a copy of the appraisal report, but many do not and many lenders tend to skip this step.  Now appraisal reports are required to be delivered to the consumer.  The consumer could waive the three day waiting period if they opt not to receive the appraisal.

As a consumer it is important to get as much information as you can about a home loan before you pull the trigger.  These new rules also help by providing more time to review the information and think things over.  Now it is up to lenders to implement these rules, but consumers should definitely be aware of what information they are entitled to starting this month.

For more infromation, go to Truth in Lending Regulation Z from the Federal Reserve

What do you think?  Will these rules make the home loan process more transparent and less stressful for consumers?


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Guest's picture

Long story short I screwed on loans twice, even with excellent credit and neither were of my fault but the banks or title companies. Both times I paid an application fee of $400 or so and did not get it back. In fact it took weeks to even get a response from Chase (I am in the process of pulling all my accounts from them I was so unhappy how they handled this). Other bank had good communication but nonetheless I still lost it. The third time they did a pre-check using the information from attempt #2 and never did ask for the fee upfront (it was rolled into closing costs).

In all honesty I doubt these rules would have helped me any (both times the loan fell through at the last minute) but it's still good news.