How Dodd-Frank Reform Impacts the Mortgage Industry

Recently, Congress rolled back some of the rules that came from the Dodd-Frank Act. The Economic Growth, Regulatory Relief, and Consumer Protection Act, in part, makes a variety of changes in an effort to reduce the regulatory burden associated with mortgage lending.

While many of the changes lessen the regulatory burden, the resulting change will likely have little impact on the consumer. One change does positively impact the consumer and eliminates a technical disclosure timing issue that, depending on the lender, could hold up one of your purchase closings.

The Truth in Lending Act (TILA) requires certain mortgage-related disclosures, including the loan’s APR and monthly payment amount, to be made to a consumer not less than three business days prior to closing. It is called a Closing Disclosure.

Before the recent changes, this three-day requirement applied to all loans — even when the lender had made the initial Closing Disclosure, but for some reason something on it changed prior to closing. That change, even when favorable to the consumer, by some interpretations, required a new three-day waiting period before closing. This requirement, depending on the lender’s interpretation of the regulation, had the potential to delay the closing — negatively impacting you, your seller, and all involved.

The changes in the new law clarify and simplify this requirement by removing the three-day waiting period when a lender makes changes that benefit the consumer and actually result in a lower APR than the initial Closing Disclosure. The new Closing Disclosure still needs to be made, but it does not reset the three-day clock that can delay a closing. While not a huge change and not an issue Embrace had in many instances, if at all, the clarity brought to the regulation that benefits everyone involved is nice.