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Here's How the Upcoming TILA-RESPA Mortgage Regulations Affect New Home Buyers

On August 1st, new mortgage lending rules went into effect - here's what they mean for you.

June 24, 2015

Effective August 1st 2015, a new set of mortgage disclosures will help streamline and clarify the mortgage process for consumers and lenders alike. The previous mortgage disclosure forms for the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA) were independently developed from each other. They proved to be daunting, complicated, and sometimes contradictory. In answer to the confusion, the new TILA-RESPA forms are designed to be clearly laid out using simple language and design making it easier for clients to read and locate key information.

In addition, the new integrated forms will help borrowers locate their interest rate, monthly payments, and closing costs on their mortgage loans. These forms will also make it easier to compare multiple mortgage loan products across multiple mortgage lenders. The TILA-RESPA changes will help clients determine whether or not they can afford a loan as well as understand what services they are paying for.

The Loan Estimate

The Loan Estimate (LE) has been constructed to help clients understand the terms of the mortgage loan they are applying for. It will provide a clear explanation and breakdown of costs including key features, costs, and risks. Once six specific items are received from the customer, either written or orally, a Loan Estimate must be provided to the borrower no later than three business days. All updates to the LE must be communicated in writing within three business days and provided to the client within seven business days.

Until the LE has been received by the borrower and the intent to proceed has been captured, lenders may not charge any fees for the mortgage Loan Estimate with the exception of a reasonable credit report fee. All Written estimates, if provided before the official Loan Estimate must clearly state your actual interest rate, including APR, monthly payment, and costs with a disclaimer that the actual fees may be higher.

During the LE process the borrower is not required to provide supporting documentation to obtain a Loan Estimate. Inaccuracies or errors in fees, with the exception of borrower selected vendors by the creditor or mortgage broker, are not valid reasons to pass on increased fees to the customer.

The Closing Disclosure

The CD or Closing Disclosure must be provided to the customer no later than three business days prior to the closing of the loan. The Closing Disclosure has been designed to help clients understand all the fees and costs involved in their mortgage loan transaction.

Changes impacting the interest rate, mortgage loan product, or the addition of a prepayment penalty require redisclosures to the client within three business days. If at the time of closing, the borrower pays more than the most recent CD by more than what is permissible by the Closing Disclosure tolerance thresholds, the creditor or broker is responsible for refunding that amount within 60 calendar days.

Game-Changing Effect

These new rules and disclosures are required by law to go into effect on August 1, 2015. Angel Oak Home Loans, an innovative mortgage broker serving the South Eastern, Central, and West coast markets, is ahead of the game. Angel Oak is implementing these new procedures and disclosures now, months ahead of the requirements by law. They have always put the priority of their clients first, striving to provide the best possible experience while offering innovative and unique mortgage loan products. As the TILA-RESPA regulations and disclosures were created to benefit clients and home buyers that are navigating the world of mortgage financing, Angel Oak is proud to adopt these standards, going above and beyond to push the mortgage industry to a higher standard.

TILA-RESPA mortgage regulations for first time homebuyers

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