Finance #2

Front 1

Equal Credit Opportunity Act

Back 1

ECOA prohibits discrimination against any loan applicant on the basis of race, color, age, national origin, sex, marital status, or dependency on public assistance

lenders can't ask questions concerning pregnancy or divorce. lenders can't arbitrarily reject secondary income. lender must notify applicant w/in 3 business days of action taken on loan request. if loan is denied, the reason for denial must be listed. borrower has the right to rebut (appeal) reasoning for loan denial

Front 2

truth-in lending law (Regulation Z)

Back 2

part of the Federal Consumers Credit Protection Act of 1968 requires disclosure of credit costs in percentage as well as total finance charges

enforced by Fed Trade Commission

applies to credit extended with a finance charge or credit payable in more than 4 installments. if the amount of percentage of down payment, the number of payments or period of repayment, the amount of payment or amount of finance charges is included in any advertisement, then the ad MUST include 3 elements

1. amount of percentage of down payment
2. terms of repayment
3. annual percentage rate (APR)

advertising the APR alone will not trigger above disclosure

if more than 5x per year, creditors extend credit secured by a dwelling, they must furnish purchaser disclosure showing all loan facts.

total amount of finance charges for the term of the loan need not be shown for st mortgages or loans used to purchase real prop

make bait-and-switch advertising a federal offense

Front 3

rescission right

Back 3

if loan is for consumer credit secured by borrower's residence, borrower has right to reconsider and cancel. right is valid until MIDNIGHT on the 3rd business day following loan completion

DOES NOT APPLY to home purchase loans

Front 4

exemptions

Back 4

exempt from all truth-in-lending disclosure requirements are business loans, ag loans, construction loans, personal prop loans over $25,000, & interest-free loans w/4 or fewer installments

Front 5

RESPA (Real Estate Settlement Procedures Act)

Back 5

requires disclosure of loan costs (separate from financing costs) for federally related real estate purchase loans of 1-4 residential units involving a new 1st mortgage

escrow impounds for taxes & insurance are not considered loan costs so don't have to be listed (like in reg Z)

requires that HUD info booklet, "Settlement Costs & You" must be given to borrower w/in 3 business days of loan app

law does not apply to business prop, vacant land, dealers buying for resale, refinancing, junior loans or loan assumptions where the lender charges less than $50

Front 6

Settlement Costs & You (HUD-1)

Back 6

uniform settlement statement, which covers all loan costs & fees, must be given to borrower on or before settlement

statement specifies the following:

-purchaser has right to review the statement on the business day prior to closing
-every charge must be justified by a service record
-the buyer cannot be required to purchase title insurance from a particular company
-lender cannot accept kickbacks for referring a service
-lender cannot charge for preparation of the disclosure statement
-limits are placed on the amount of advance taxes & insurance payments the lender can collect (prorated to date of closing plus 2 months in advance)

Front 7

soldiers & sailors civil relief act

Back 7

can't have foreclosure sale for nonpayment is allowed (if debt was before person entered military service) unless by court order, until person has been out of military service for more than 3 months

for reservists & draftees interest rate can't exceed 6%

Front 8

bankruptcy

Back 8

creditors can force a debtor who is unable to pay into this. debtor can petition for voluntary bankruptcy

a person can't declare bankruptcy more than once in a 7 yr period

Front 9

real property taxation

Back 9

real estate taxes are "ad valorem" taxes, tax is assessed according to the value of the prop

total of the assessed valuations is known as the "assessment roll, assessment tax roll or tax base"

Front 10

how taxation authority determines tax rate

Back 10

tax rate = budget rate / assessment roll

tax rates are often expressed in "mills"

a mill is 1/10 of a cent of $.001

tax rate might also be expressed as a rate per $100 or $1000 (ex. the rate of .0425 per dollar would be $4.25 per $100)

Front 11

tax sale

Back 11

if taxes are not pd, they become a specific lien on the prop

after a specified period, a sale at public auction is held. the tax collector issues a tax deed or quitclaim deed to the purchaser

deed is not provided until redemption period expires

Front 12

adjusted cost basis

Back 12

amount of taxable gain that is computed by deducting the seller's book value from net sales price

this is the original cost, less depreciation

although improvements will increase this, repairs will not

Front 13

taxpayers relief act of 1997

Back 13

a homeowner could defer tax on a gain from the sale of a personal residence by purchasing another residence within 2 yrs of the sale that cost the same or more than the sales price of the former residence

to be eligible homeowner must have occupied a residence for a total of 24 months (2 years) during the preceding 5-year period (2 out of 5 occupancy rule)

occupancy does not need to be contiguous (ex: could be for 6 months per year over a period of 4 years)

Front 14

exemption from taxation

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married couples: $500,000
single persons: $250,000
55+: $125,000 (1 time use)

ex: if married couple paid $450,000 for a home & spent $70,000 in improvements, they would have a cost basis of $520,000. if they sold prop for $1,000,000 their capital gain of $480,000 would be exempt from taxation providing they had met the 2 out of 5 residency rule