For Buyers, More Protections

New Rules Require That Mortgage Costs Be Disclosed Within 3 Business Days Of Loan Application

What might cause the APR to increase after early disclosure? Say you left your initial rate on the loan to float with the market, but rates increase. Or the lender got inaccurate estimates of costs from third-party participants in the transaction, such as the settlement or escrow company. Or 11th-hour junk fees materialize.

All these events ---- which have been frequent sources of consumer complaints this decade ---- could force the lender to redisclose loan costs and set back timing for the settlement.

What are some of the likely repercussions of the Fed's new mandates? No. 1, the traditional approach of aiming in advance for a date-certain settlement target for home loan transactions almost certainly will be affected. Actual closing dates will be more closely tied to lenders' and settlement agents' accurate estimates and their ability to deliver disclosures and appraisals by the required dates.

Second, the purposes of the rules are to afford consumers better access to, and more time to consider, key elements of what are major financial transactions for most people. There might be fewer instances of last-minute closing-date surprises on fees, where buyers are slammed with hundreds of dollars of charges they'd never expected.

Finally, the rules may well trigger new waves of litigation if lenders and their business partners are not scrupulous in their compliance. There is an active and aggressive segment of the legal profession that specializes in going after banks and mortgage companies for truth-in-lending violations. Don't be surprised if you hear of lawsuits seeking cancellation of mortgage deals because timing deadlines were not met, appraisals not received.