Consumer Law

Amendments to TILA

By Jeff Sovern

Most of our posts on the federal housing act signed into law last month, which can be found at Pub. L No. 110-289, 122 Stat. 2654, have focused on the Hope for Homeowners Act of 2008.  But the statute also contained other consumer law provisions aimed at the subprime mortgage meltdown.  It included the Mortgage Disclosure Improvement Act of 2008, which amended 128(b)(2) [§ 1638] and 130(a) [§ 1640] of TILA.  When the amendments become effective, which might not be for thirty months, they wlll change the disclosures for adjustable rate loans.  Lenders making such loans will have to provide examples of how shifts in interest rates would affect the monthly payments; one such example must present the highest possible payment the consumer would be required to make. Before the Fed publishes rules implementing the new provision, it is to conduct consumer testing to determine the appropriate format for providing the disclosures ?so that such disclosures can be easily understood, including the fact that the initial regular payments are for a specific time period that will end on a certain date, that payments will adjust afterwards potentially to a higher amount, and that there is no guarantee that the borrower will be able to refinance to a lower amount.?  Other amendments, which become effective next year, provide that good faith estimates of disclosures are to be made at least seven business days before consummation of the loan, except when the consumer is experiencing a bona fide personal financial emergency. Congress also increased the amount of statutory damages for TILA violations in closed end credit loans secured by real property.  The housing statute also provided for registration of mortgage originators in the S.A.F.E. Mortgage Licensing Act of 2008.

Full post as published by CL&P Blog on August 11, 2008 (boomark / email).