Understanding the 3-7-3 Rule in Mortgage Disclosures

The "3-7-3 Rule" is crucial for understanding the timing requirements for providing disclosures in mortgage lending, as mandated under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). These regulations are integrated under the TILA-RESPA Integrated Disclosure (TRID) rules, administered by the Consumer Financial Protection Bureau (CFPB). Here's how the rule breaks down:

• Three Days Before Consummation: The Closing Disclosure must be provided to the borrower at least three business days before the loan consummation. This document finalizes the terms and costs associated with the mortgage.
• Seven Business Days After Initial Loan Estimate: The Loan Estimate must be delivered or placed in the mail no later than the seventh business day before the consummation of the transaction. It provides details such as the estimated interest rate, monthly payment, and total closing costs.
• Three Business Days for Revised Loan Estimates: If there are significant changes that affect the APR, the loan product, or if a prepayment penalty is added, a revised Loan Estimate must be issued at least three business days before consummation.

These rules are designed to give borrowers ample time to review, understand, and compare the terms of their loans before making a final decision, thereby increasing transparency and consumer protection in the lending process.