Scotsman Guide - September 2009 Residential Edition

Guess What? Regulation Z Already Changed

Brokers must know the critical amendments, which took effect two months sooner than expected

By Laura Marquez-Garrett and Miriam Cho, attorneys, Foster Pepper PLLC

The latest amendments to Regulation Z, which implements the Truth in Lending Act (TILA), contain an element of surprise in their start date. Originally expected to take effect this coming Oct. 1, the amendments went live on July 30.

The reason for the hurry is to keep up with new legislation. In July 2008, President George W. Bush signed into law the Housing and Economic Recovery Act of 2008, considered the one of the most-sig-nificant pieces of housing legislation in decades. Among the myriad changes in the housing act is amendment of TILA via the Mortgage Disclosure Improvement Act of 2008 (MDIA).

Congress amended the MDIA — enacted as part of the housing act — in connection with enactment of the Emergency Stabilization Act of 2008 this past Oct. 3.

The Regulation Z changes are meant to implement MDIA’s amended provisions.

The Regulation Z amendments’ stated goal is to increase consumer awareness and involvement in the loan process. They purport to accomplish this by creating brief waiting periods after disclosures are provided but before loan consummation, requiring additional disclosures and imposing restrictions on charging fees before making the requisite TILA disclosures.

Although the Regulation Z revisions are not extensive, brokers must familiarize themselves with the new rules or else find themselves subject to liability.

do not change the application of TILA, which still applies to loans for the purchase or construction of a residence, refinances and home-equity loans. TILA’s disclosure requirements do, however, now apply to loans secured by any consumer dwelling, not just principal dwellings.

Good-faith estimate (GFE): ■ A GFE still must be provided within three business days after the creditor receives the consumer’s written application. But now the creditor must wait at least seven business days before completing the transaction.

Revised GFE: ■ Revised GFEs also are subject to the Regulation Z revisions. A revised GFE must be provided if the annual percentage rate disclosed becomes inaccurate (as defined by the act), and corrected disclosures that include all changed terms must be provided. There is now a three-day waiting period between disclosure of the revised GFEs and completing the transaction.

Notice to consumers: ■ Original and revised GFEs must contain the following statement: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

On the Web

Federal Reserve Board notice and official commentary regarding implementation of Truth in Lending Act Final Rule: sctsm.in/TILArule

What changed Here is an overview of the changes, categorized by key phrases and terms.

Any consumer dwelling: ■ The revisions

Major changes, categorized by key phrases and terms, include:

Any consumer dwelling ■

Good-faith estimates (GFEs) ■

Revised GFEs ■

Notice regarding completion ■ requirement

Definition of a business day ■

Emergency exception to waiting ■ periods

Fees ■

Laura Marquez-Garrett and Miriam Cho are attorneys with Foster Pepper PLLC ( www.foster.com) and work on mortgage-industry matters, including the representation of mortgage lenders and brokers in litigation and regulatory-compliance matters. E-mail Marquez-Garrett at Marql@ foster.com and Cho at Chomi@foster.com.

Business day: ■ Business days are defined as “a day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions.” The term also refers to all calendar days, except for Sundays and legal public holidays.