What is the additional waiting period if the closing disclosure changes the APR or adds a prepayment penalty?

When a closing disclosure presents changes to the Annual Percentage Rate (APR) or introduces a prepayment penalty, federal regulations mandate an additional waiting period of three business days before the transaction can be finalized. This waiting period is designed to ensure that borrowers have sufficient time to review these significant changes and to make informed decisions.

The rationale is that an alteration in the APR can significantly impact the cost of borrowing, and the introduction of a prepayment penalty can restrict borrowers' options to pay off their loan early, which is a critical factor for many consumers. Providing this three-day window allows borrowers to assess the implications of these changes and consider whether they wish to proceed with the loan terms as revised. Thus, the correct understanding of this requirement under the Truth in Lending Act (TILA) reinforces the consumer protection measures in place regarding mortgage lending practices.