The Truth In Lending Act is a federal law that promotes the informed use of consumer credit by requiring disclosures about terms and costs. Failure to comply with the law may entitle a mortgage borrower to “rescind” a home loan and unwind the transaction. Under the Dodd-Frank Wall Street Reform Act (“Dodd-Frank”), those disclosure rules will change by August 1, 2015.
Specifically, the Consumer Protection Financial Bureau is making new rules under Dodd-Frank to streamline the disclosures and limit the changes in fees from loan application and estimate through closing that can be charged as part of a mortgage transaction. Lenders must provide a “Loan Estimate,” which includes (1) identifying information describing the borrower and loan, (2) loan terms, amount, payments and rate, (3) particular loan features such as prepayment penalties and balloon payments, (4) projected monthly payments showing any increases; (5) estimated cash to close and closing costs; (6) disclosures on all payments to be made in the five years of the loan; and (7) a Total Interest Payment disclosure.
For more information on this rule change, and how your own home loan could be affected, visit: http://www.mbaa.org/files/Advocacy/2013/MBASummaryofRESPA-TILADisclosureRule11-20-13.pdf.