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Revised Disclosures Go Live in July

Revised Disclosures Go Live in JulyMortgage Disclosure Improvemen t Act effective July 30

May 8, 2009

By staff

Revised disclosure requirements under the Mortgage Disclosure Improvement Act will become effective this summer.The new act is a July 2008 amendment to the Truth-in-Lending Act. It seeks to ensure that prospective borrowers receive cost disclosures earlier in the mortgage process.

Under the MDIA, which creditors must comply with for new applications received on or after July 30, a Good Faith Estimate is required within three days of the application, a statement from the Federal Reserve Board today said. In addition, aside from a “reasonable” credit report fee, no fees can be collected prior to the GFE.

“In several respects, the MDIA is substantially similar to final rules issued by the board in July 2008,” the statement said.

The fed announced an updated TILA rule last July.

“However, the MDIA also broadens and adds to those regulatory requirements,” according to the latest announcement. “The final rule largely follows a proposal issued by the board in December 2008.”

In the December proposal, the fed noted that the new act broadens the requirement for good faith estimates to loans on properties that are not the borrower’s primary residence. It also requires seven days between early disclosures and the loan closing and adds three days to the waiting period for any changes to the loan terms or annual percentage rate.

“These requirements are consistent with the board’s July 2008 final rule, which applied to loans secured by a consumer’s principal dwelling,” the bank stated. “The MDIA broadens this requirement by also requiring early disclosures for loans secured by dwellings other than the consumer’s principal dwelling, such as a second home.

The Consumer Mortgage Coalition had written to the fed in February requesting that decreases in annual percentage rates don’t trigger a new waiting period. But the group was more successful with its request for a waiver of the mandatory waiting period if a foreclosure is involved.

“The rules would permit a consumer to expedite the closing to address a personal financial emergency, such as a foreclosure,” today’s fed statement said.

The coalition had also asked that disclosure accuracy be based on the most recent — not earliest — disclosures sent in the transaction, though the issue wasn’t addressed in today’s statement.

MDIA Analysis
On May 8, 2009, the Federal Reserve Board issued a final rule implementing changes to the Truth in Lending Act made by the Mortgage Disclosure Improvement Act of 2008. The final rule advances to July 30, 2009, the compliance date for early disclosure requirements adopted by the board in a July 2008 rulemaking, and expands the requirements.

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