This is a great question because I’ll bet a $100,000 not one mortgage broker in a thousand knows the answer to the question or abides by the rules.

Lender Redisclosure Requirements

Redisclosure rules are set down in the Real Estate Settlement and Procedures Act…a Federal law and I found the section covering redisclosure.

Here it is …

19(a)(2) Redisclosure required.
1. Conditions for redisclosure. Creditors must make new disclosures if the annual percentage rate at consummation differs from the estimate originally disclosed by more than 1/8 of 1 percentage point in regular transactions or 1/4 of 1 percentage point in irregular transactions, as defined in footnote 46 of § 226.22(a)(3). The creditor must also redisclose if a variable rate feature is added to the credit terms after the original disclosures have been made. The creditor has the option of redisclosing information under other circumstances, if it wishes to do so.

2. Content of new disclosures. If redisclosure is required, the creditor may provide a complete set of new disclosures, or may redisclose only the terms that vary from those originally disclosed. If the creditor chooses to provide a complete set of new disclosures, the creditor may but need not highlight the new terms, provided that the disclosures comply with the format requirements of § 226.17(a). If the creditor chooses to disclose only the new terms, all the new terms must be disclosed. For example, a different annual percentage rate will almost always produce a different finance charge, and often a new schedule of payments; all of these changes would have to be disclosed. If, in addition, unrelated terms such as the amount financed or prepayment penalty vary from those originally disclosed, the accurate terms must be disclosed. However, no new disclosures are required if the only {{8-29-08 p.6958.01}}inaccuracies involve estimates other than the annual percentage rate, and no variable rate feature has been added.

3. Timing. Redisclosures, when necessary, must be given no later than “consummation or settlement.” “Consummation” is defined in § 226.2(a). “Date of settlement” is defined in Regulation X (24 CFR 3500.2(a)) and is subject to any interpretations issued under RESPA and Regulation X.

4. Basis of disclosures. In some cases, a creditor may delay redisclosure until settlement, which may be at a time later than consummation. If a creditor chooses to redisclose at settlement, disclosures may be based on the terms in effect at settlement, rather than at consummation. For example, in a variable-rate transaction, a creditor may choose to base disclosures on the terms in effect at settlement despite the general rule in the commentary to section 18(f) that variable-rate disclosures should be based on the terms in effect at consummation.

So here’s what this says in layman’s terms. Redisclosure is only required when a APR changes by more than .125% on prime loans and .25% on subprime loans….and /or a variable rate is added…and the redisclosure of these changed terms is not required to be given to the client until closing.

What?

Yep…even when the redisclosure is required…they can take you all the way to the closing and spring it on you then if they want to. Remember you have the right to request a HUD1 Settlement Statement 24 hours in advance, and this is just another reason to avail yourself of this right.

Thanks for the question…

UPDATE 7/30/2009: The Mortgage Disclosure Improvement Act went into effect staring today. It changes the rules a little…and here they are:

• Lenders and brokers can not collect fees before borrower has received initial disclosures with sole exception being the credit reporting fee. However, in my day, the initial disclosures were produced at the application signing. So in this case, the fees for application(if charged), appraisal and credit report could still be collected under the new rules.

• Seven business days from inital disclose must elapse before closing the loan.

• Re-disclosure is required if the APR is one-eighth (.125) above or below what was disclosed on the initial TIL. Three business days must elapse after redislcosue prior to closing.

• Effective for applications taken on or after July 30, 2009.

These disclosure waiting periods are being referred to as the “3/7/3 Rule” of the MDIA. Initial disclosure must be in 3 days, a closing can’t occur before seven days of initial disclosure…and if a final redisclosure changing the terms was required…and additional three day rule must be adhered to before the loan can close.

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