January 27th, 2018 10:12 AM by Jackie A. Graves
Federal laws require you to receive many disclosures from your
lender during your mortgage process, and while it can feel like too much
paperwork, these disclosures exist to protect you and provide clarity during
your loan process. One of the oldest regulations pertaining to mortgage fee
disclosures is the Truth In Lending Act (TILA) created in 1968. Let’s take a
look at what this is and how it helps you.
also known as Regulation Z, protects consumers from closing cost abuses by
requiring that all lenders calculate and disclose loan terms and fees in the
same way. This rule applies to mortgages and other forms of consumer credit.
primary focus of TILA isn’t to regulate how much lenders can charge, but rather
to regulate how lenders disclose fees and terms.
goal is to ensure consumers will receive quotes in the same overall format when
shopping for mortgages or other loan types, enabling them to easily decipher
the best terms when comparison shopping.
Federal Reserve Board was responsible for TILA rule making and enforcement from
1968 to 2011, then this responsibility was transferred to the Consumer Financial
Protection Bureau (CFPB), an agency created in July 2011 in response to the
2007-2008 financial crisis to consolidate all of the government’s consumer
financial protection agencies.
CFPB is funded by the Federal Reserve, so the spirit of TILA has been preserved
— and enhanced — since 2011.
to October 2015, TILA mandated that a mortgage lender send you a Good Faith
Estimate and an initial Truth In Lending disclosure within three days of
applying for a mortgage. Together, the two forms show your quoted rate, APR,
sum of fees, terms, and costs over the life of the loan.
CFPB deemed these forms too confusing because fees, calculations, and
explanations were spread across two separate multi-page disclosures, so the
bureau updated the forms effective with all loan applications after October 3,
Now a lender must send you a Loan Estimate
Form within three days of applying for a mortgage, which
provides a detailed line-item breakdown of fees, cash needed to close, quoted
rate, APR, terms, and costs over the life of the loan. The lender must also
obtain your written intent to proceed before it can move forward.
new Loan Estimate disclosure replaced the Good Faith Estimate and Truth in
Lending disclosures in the beginning of the mortgage process. It is then
followed by a Closing Disclosure form that you get at the end of the process.
can read more about these two disclosures and how they impact the timing of
your loan process here.
To view the original