What you need to know about changes to the Truth in Lending Act
I recently found an article regarding the recent changes in the “Truth in Lending Act” and anyone looking to buy a home in the near future should be familiar with this information, as it could effect the time frame for settlement. I have included part of the article below, but in respect for the writer, click here to read the entire article
By now it’s well known in the real estate industry that the Truth in Lending Act (TILA) has been amended. There’s a great deal of concern and uncertainty about these changes, how they may affect real estate settlements and how they relate to the changes in RESPA [1] that become mandatory on January 1, 2010.
The changes to TILA went into effect on July 30 and are intended to help a prospective borrower understand the terms and costs associated with the loan they are pursuing. Lenders are required to disclose the costs of the loan (finance charge) as a dollar amount as well as the loan’s annual percentage rate. Requiring uniformity among lenders is intended to help consumers shop among lenders for the best loan. Lenders must now provide this initial disclosure to any dwelling-secured mortgage loan that is subject to RESPA and the disclosure must be given within three business days of the lender receiving the consumer’s application.
Two major changes are encompassed by this amendment. First, TILA now applies to all loans that are subject to RESPA. Previously, TILA applied to only those transactions in which the consumer was purchasing or building his principal dwelling. Because of this change the initial – or early – disclosure must be provided when a consumer (a) buys or builds a home; (b) buys or builds a second or vacation home; or (c) refinances a mortgage with a new mortgage. This is not an exclusive list of the transactions that require TIL disclosures, it is an example of how the law has expanded. The TIL early disclosure is also required when the person (primarily) responsible for the loan is not the primary resident. The determining factor is whether the loan was extended for consumer credit. Importantly, the TIL disclosure requirements still do not apply to loans that are primarily for business purposes. Thus, investment properties in which the owner does not intend to live probably do not fall within the TIL umbrella.
