What happens if the difference between disclosed and actual APR exceeds the threshold?

When the difference between the disclosed Annual Percentage Rate (APR) and the actual APR exceeds the established threshold, the lender is required to re-disclose the terms of the loan to the borrower. This requirement is in place to ensure transparency and protect consumers from potential misrepresentation of loan costs. The threshold for APR discrepancies is defined by regulation, and if the actual rate surpasses this threshold, it indicates that the borrower may not have the full picture of their loan's cost.

Re-disclosure provides the borrower with updated information about their loan terms, allowing them to make informed decisions. This requirement emphasizes the importance of accuracy in loan documentation and the need for lenders to maintain clear communication with borrowers. By ensuring that any changes in the APR are promptly disclosed, the regulations help prevent surprises at closing and promote consumer confidence in the mortgage process.