New rules put onerous spin on HEL disclosures.

To get an idea of just how onerous the new high-cost mortgage loan disclosures a re, Federal Reserve officials, overseers of the Truth in Lending Acts disclosure regs, said in off-the-record comments that the disclosure provisions for the so-called high cost mortgage loa ns make TILA disclosures look tame. And the penalties for noncompliance arent any cakewalk, either. Any failure to c omply carries the potential for private lawsuits or state attorney general actions for actual dama ges and all finance charges and fees paid by the consumer unless the creditor demonstrates that the failure to comply is not material. Attorneys fees are recoverable and class action lawsuits are al so permitted. The new disclosure requirements were included in the Home Ownership and Equity P rotection Act, part of the Community Development, Credit Enhancement, and Regulatory Impro vement Act that was passed Aug. 9. For applicable high-rate mortgages, lenders must provide a specific pre-closing disclosure not less than three business days prior to consummation. It must conspicuously state in l anguage in the act that the borrower is not required to complete the agreement simply because a loa n application has been signed. It must also state that if the loan is obtained that the borrower c ould lose his home and money put into it. Also, the disclosure must contain the annual percentage rate and amount of the r egular monthly payment. For a variable rate loan, the disclosure has to state that the rate can increase and give the maximum monthly payment based on the rate cap. No changes can be made to the terms of the loan after the initial disclosure has been made unless new preclosing disclosures are provided. These disclosures can be made by teleph one provided that the change in terms was initiated by the consumer, the lender provides the modified disclosures in writing at closing, and the lender obtains the borrowers certific ation that the new disclosures were provided by telephone three business days prior to consummation . There is also a new disclosure for reverse mortgages and a requirement that lend ers include a prominent notice of the potential liability of assignees of their exposure to bo rrower claims and defenses. The Fed is tasked with creating the text of this notice. Disclosure requirements aside, some consumer groups arent convinced the Feds reg ulatory efforts to expand the rules beyond what Congress outlined will go far enough. Congress, which specified several requirements in the legislation such as the disclosure and reverse mortg age rules, chose to leave it to the Fed to expand on those points. Public Citizen, a Ralph Nader-led consumer activist group has questioned how far the agency will go in using its regulatory authority in this area to expand the rules to cover a reas not touched by the new legislation. The group criticized the high-cost mortgage provisions in the recently passed Ho me Ownership and Equity Protection Act, part of the Community Development, Credit Enhancement , and Regulatory Improvement Act, as lenient and offered recommendations to Congress t o beef up the laws.