The new regulations being implemented by the Consumer Financial Protection Bureau (CFPB) are intended to help protect consumers. But borrowers rushed to get their mortgage applications processed last week before new disclosure regulations took effect.
The Mortgage Bankers Association survey for the week ending October 2nd reports that total mortgage application volume rose 25.5 percent over the previous week.
The sharp rise in mortgage applications reflects anxiety about the new regulations, as well as homebuyers' desire to lock in record-low interest rates.
The TILA-RESPA Integrated Disclosure rules enacted by the Consumer Financial Protection Bureau, also called the "Know Before You Owe" rules, consolidate four existing mortgage disclosure forms into two new ones: a loan estimate, to be delivered by the third business day after a borrower has filed a loan application, and a closing disclosure, to be delivered to the borrower at least three business days prior to closing.
Lenders and mortgage brokers are required to deliver the new forms for loan applications received on or after October 3rd, 2015.
Loans that are excluded from the new rules include home equity lines of credit (HELOCs), reverse mortgages and mortgages secured by a mobile home or a dwelling that is not attached to real property, such as a house being purchased to move.
TILA-RESPA also includes a provision for a mandatory three-day loan review if certain conditions arise, such as if the lender increases the APR, adds a prepayment penalty, or changes the basic loan product in any significant way. Homebuyers' desire to avoid delays may have helped contribute to the recent increase in mortgage applications.
An interest rate drop certainly contributed to the influx of new mortgage applications, as well. The Mortgage Bankers Association reports that the rate on 30-year fixed-price mortgages fell to 3.99% in the week ending October 2nd, down from 4.08% the week prior. Interest on 30-year fixed-rate mortgages is now at its lowest level in the last five months.