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Fed approves Reg Z disclosure changes
WASHINGTON (5/11/09)—The Federal Reserve Board on May 8 approved revisions to its Regulation Z mortgage disclosure requirements that will implement provisions of the Mortgage Disclosure Improvement Act (MDIA). Under the MDIA, lenders would be required to provide full loan cost estimates to potential homebuyers before the lender could receive any form of payment, outside of credit check charges, from the borrower. The rules would also enact current MDIA rules that impose a weeklong waiting period between the aforementioned cost estimate and the closing of the mortgage. Additionally, lenders would need to provide new disclosures, including a revised annual percentage rate, if the existing interest rate significantly changes between the time that the first estimate is given and the closing date. Borrowers may also change the timing of the loan disclosures or the closing of the loan, in the event of a so-called “financial emergency.” In a comment letter sent earlier this year, the Credit Union National Association (CUNA) suggested that some of the timing restrictions on creditors should be relaxed if the changed APR results in an interest rate reduction. CUNA also asked the Fed to replace the two definitions of “business day” that were in the proposed rule with a single definition, consistent across all provisions of Reg Z. CUNA will examine the final rule to ensure that these and other concerns have been addressed, Assistant General Counsel Jeffrey Bloch said. Though a May 8 Fed press release said that the new rules would apply to all mortgage applications received on or before July 30, 2009, the regulations, as officially presented in the Federal Register, would apply to all mortgage applications dated July 30, 2009 or later. The Fed is currently working on further revisions to the Regulation Z disclosure requirements for closed-end rules, including rules addressing mortgages. A larger, more comprehensive proposal on these rules should be issued in the coming months.

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