What must happen if there is an increase in the Annual Percentage Rate (APR) by more than 1/8th after the closing disclosure has been delivered?

If there is an increase in the Annual Percentage Rate (APR) by more than 1/8th after the closing disclosure has been delivered, the lender is required to re-disclose the terms to the borrower and wait an additional three business days before closing the transaction. This requirement is part of the rules established by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) integrated disclosures (TRID).

The re-disclosure process is essential as it ensures that borrowers are fully informed of significant changes in the cost of borrowing, allowing them to understand the financial implications of the increased APR. This three-day waiting period provides borrowers with sufficient time to reconsider their loan terms and make informed decisions regarding their mortgage, promoting transparency and consumer protection in the lending process.

This process is distinct from situations where minor changes may not necessitate such measures or where borrowers may choose to waive waiting periods for certain reasons, but the specific requirement triggered by a significant APR increase mandates this re-disclosure and waiting period for the transaction to proceed.