New Federal Rules Protect Mortage Applicants

A new set of consumer-protection rules take effect July 30, including requiring lenders to provide consumers with initial disclosures of the estimated mortgage costs within three business days of the loan application; prohibiting lenders from collecting any fees prior to the consumer receiving the loan-cost disclosures; and prohibiting quickie closings on loans.

Traditionally, many mortgage brokers and lenders collected fees covering appraisal, credit, and other charges at the time of application. The new rules eliminate this practice and prohibit lenders from collecting any fees until the consumer has received the truth-in-lending disclosures and an annual percentage rate (APR) calculation of the loan costs.

The new rules also require lenders to deliver a copy of the real estate appraisal to the home buyer three business days before the scheduled closing on the loan. Previously, federal regulations guaranteed that consumers could request and obtain a copy of the appraisal, but many home buyers were not aware of this right.

Additionally, the rules prohibit quickie closings on loans by requiring a seven-day waiting period after applicants are handed their early disclosures or the disclosures are mailed. This provides applicants a week to think about the transaction and to decide whether it is right for them. Final truth-in-lending disclosures are due three business days before closing.

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