The new rules, which are part of the amended federal Truth in Lending Act, also known as Regulation Z, were enacted July 2008 and became effective July 2009. Most of the rules concern the Truth in Lending, or TIL, statement, which lenders must give borrowers when they apply for a loan. The TIL discloses the annual percentage rate, or APR, finance charges, amount financed, total payments, payment schedule and other loan terms.
One of the biggest changes is that lenders must now provide a TIL statement for all types of closed-end residential real estate loans, rather than just home purchases. That means borrowers now will get a TIL for the purchase of a second or vacation home or a refinance. Commercial property loans and home equity lines of credit, or HELOCs, are still exempt.
et another new rule is that if the APR changes by more than 0.125 percent, the lender must give the borrower an updated TIL, after which the loan cannot close for at least three days.
The APR could change due to a change in the interest rate, loan program or loan-related fees, the last being the most common reason, according to Randi Bennett, an escrow officer at First Centennial Title Co. of Nevada in Reno, Nev.
The additional disclosures should ensure that borrowers receive more accurate information about loan costs and reduce the incidence of surprises at closing. That would be a huge benefit for borrowers, some of whom, Bennett says, have broken into tears in her office when they've received the final statement of closing costs.
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