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78 Cards in this Set
- Front
- Back
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When was the Truth-in-Lending Act enacted
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1968
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What are the primary goals of TILA
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1. protect consumers by disclosing costs/terms 2. create uniform standards for stating costs 3. ensure advertising for credit is truthful/not misleading 4. provide borrowers with right to rescind |
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What is referred to as the "Mortgage Reform and Anti-Predatory Lending Act"
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Dodd-Frank Act
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What regulations cover TILA
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Regulation Z (tell Z truth)
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Who is responsible for implementing and enforing TILA and Regulation Z?
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CFPB (as of July 2011) BUT FTC still retain some supervisory and enforcement authority |
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TILA DOS NOT apply to what credit transactions (loans)
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1. business, agricultural or organizational credit 2. Credit in excess of threshold amount adjusted annually 3. public utility credit 4. credit extended by broker 5. home fuel budge plans 6. student loans 7. employment-sponsored retirement plans |
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What is a closed-end loan? |
when a lender disburses all of the funds at closing and demands repayment within a specified time period. Borrower may not receive an increase in the loan amount. Examples: loan to purchase, loan to refinance |
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What is an open-end loan?
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A loan in which the both borrower and lender anticipate repeat transactions. Lender gives borrower a limit on amounts available. Payments depend on interest due on amount withdrawn. |
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A Creditor is defined as a natural persons or business and financial organization that do the following |
- regularly extend consumer credit -Make credit subject to finance charge/payable (more than 4 installments) - Receive initial payment |
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A person "regularly extends consumer credit" if the credit is secured by a dwelling and...
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1. extended more than 5 times in calendar year 2. creditor originates ore than one credit extension that is high cost in 1 year |
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Finance Charge
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cost of credit (dollar amount) |
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Prepaid finance charge
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finance charge paid before or at time of consummation |
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Annual Percentage Rate (APR) |
cost of credit expressed as a percentage (Interest rate + prepaid charges) *always higher than interest rate |
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Open-End Credit |
credit that may be accessed in a revolving manner ie. credit card, HELOCs (Home Equity Line of Credit) |
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Creditor
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individual/entity that extends closed/open-ed credit and imposes finance charge
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CHARM Booklet |
disclosure booklet for Adjustable-Rate Mortgages
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Trigger Terms
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Terms used in advertising that trigger an obligation to provide specific information regarding the cost and terms of a loan product
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Loan Estimate
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disclosure due no more than 3 business days (includes Saturday) after complete loan app (provides estimate costs of the loan) |
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Closing Disclosures
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disclosure due no later than 3 business days (includes Saturday) prior to consummation (provides statement of the costs of mortgage lending transaction) |
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What 6 pieces of information make up and Application
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A.L.I.E.N.S 1. Address of property 2. Loan amount 3. Income 4. Estimated property value 5. Name 6. Social Security Number |
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What does the finance charge not include? |
any fees that are payable in a comparable cash transaction, such as taxes. |
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What does the finance charge include?
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Fees paid to third parties, such as settlement services
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When is there no difference between the APR and the interest rate? |
when there are no fees for origination and the interest rate is fixed |
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What shows the loan costs to be paid in addition to the interest rate of a loan?
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APR
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What fees are included in the calculation of the APR?
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-PMI or MIP -Discount points/mortgage fees -Origination fees -Processing fees -Underwriting fees |
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What fees are excluded in the calculation of the APR?
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- Title fees -Escrow fees - Notary fees - Appraisal and credit report fees - Document prep fees |
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What are the three main objectives of TILA
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C.A.R. 1. Cost of credit 2. Advertising 3. Right to rescind |
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What disclosures must a Closed-End ARM receive?
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1. CHARM Booklet 2. Loan Program Disclosure (for each variable-rate mortgage product) |
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When are rate/payment change disclosures not required?
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- when transaction involves an ARM with term of 1 year -first adjusted payment is due within 210 day s after close & rate disclosed was not an estimate |
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What is a look back period and what is the range |
number of days prior to the change date on which the indez value would be selected which would serve as the basis for the new interest rate and payment. Range between 15 and 60 days |
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When must rate/payment change disclosures be sent out
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at least 60 days and no more than 120 days prior to the rate change
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What are the three exceptions for rate/payment change disclosures being sent out
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1. Grandfathered ARMs (25-120 days notice) 2. ARMs with Frequent Rate Adjustments (25-120 days notice) 3. ARMs Adjusting 60 Days after Consummation (25-120 days notice) |
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When must the estimated interest rate and payment change be calculated?
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15 business days prior to the date of the disclosure
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What are the three distinctive features that Home Equity plans have?
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1. Mortgage is an open-end loan 2. Mortgage is secured by a dwelling 3. APR corresponds to the periodic rate |
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Do the Loan Estimate and Closing Disclosure requirements apply to transactions for home equity plans?
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No- Open-end transactions have a separate set of rules.
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What is the Three-Business-Day Rescission Period
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interval where borrower has the opportunity to reconsider whether they want the loan and the ability to cancel within timeframe |
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When is the Three-Year Rescission Period available
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When borrower does not receive a notice of the right to rescind or accurate TIL disclosure at time they entered an agreement for loan. |
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What types of loans are subject to the right of rescission?
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-Home Equity Lines of Credit (HELOCs) -Refinances -Home Improvement Loans |
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What types of loans are NOT subject to the right of rescission?
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-Residential Mortgage Transaction (ie. purchase or construction of a dwelling)
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Who must receive the Right to Rescind Notice? |
two copies to each party with an ownership in the principal dwelling. HOWEVER-anyone can sign it |
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If a customer decides to rescind transaction, how many days does a creditor have to return any money paid by customer |
20 calendar days
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When can a waiver of the right to rescind be used
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bona fide financial emergency
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What is the accuracy of disclosures tolorance
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-no more than 1/2 of 1% of the face amount of the note or $100 (whichever is greater)\ OR -greater than the amount required to be disclosed |
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When can subprime loans exercise right to rescind?
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When finance charge was understate by $36 |
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What is the fundamental Advertising Rule when stating credit terms
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shall only state terms that are offered by the creditor
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ADVERTISING: what are the trigger terms for open-end mortgages (ie. Home Equity plans) |
-finance charges -taxes -payment terms |
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ADVERTISING: what are the trigger terms for closed-end loans
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-amount or percentage of down payment -number of payments -payment amounts -finance charge |
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What are the 7 deadly sins in Advertising
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1.Misleading "fixed" rates and payments 2. Misleading comparisons *must give specifics 3. misrepresentation about government endorsements (use of gov. seals) 4. Misleading use of lender name (cannot use a lender name not your own) 5. Misleading claims of debt elimination 6. Misleading use of the term counselor 7. Misleading foreign-language (must use same language throughout ad) |
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What is the criminal liability fine for violations of TILA
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up to $5,000, imprisonment for up to one year or both.
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What fees are always included in the finance charge
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Mortgage Broker Fees |
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What are closed-end loan trigger terms
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-amount of a down payment -payment amounts -Finance Charge -Number of Payments |
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When must the Loan Estimate be delivered?
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no more than 3 business days after application is received
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When can a Loan Estimate delivery regulation be waived?
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When consumer has a bona fide financial emergency and signs written waiver |
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For how many years must the documentation indicating the consumers intent to proceed be retained?
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3 years
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What is one of the goals of the Loan Estimate
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To provide consumers with reliable estimates of closing costs
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What are the charges that may vary on a Loan Estimate?
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- Prepaid Interest - Property Insurance Premiums - Amounts placed in an escrow account - Charges paid to third-party service provides chosen by consumer |
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When is a creditor required to provided a revised Loan Estimate to borrower?
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- if the interest rate changes - if charges increase by more than 10% - change in eligibility - consumer delays (more than 10 days) - Construction delays (more than 60 days) |
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How many days does the consumer have to receive a revised loan estimate?
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No later than 4 business days prior to consummation
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What is the percentage tolerance for discrepancies between estimated and actual closing costs?
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10 %
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Loan Estimate is Required for what types of loans?
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All Federally-related loans
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When must the fully-indexed rate be disclosed
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if the interest rate is adjustable |
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When are prepayment penalties permitted?
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Fixed-rate qualified mortgages
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Are a lender creditors numbers listed as positive or negative on the Total Closing Costs section of the Loan Estimate?
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Negative Number
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When is the AIR (Adjustable Interest Rate) table required on the Loan Estimate?
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If the interest rate may increase after consummation
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What information is required for consumers to use to compare loan products offed by different lenders on the Loan Estimate (page 3)?
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- what the payment will be In 5 Years - APR (Annual Percentage Rate) - TIP (Total Interest Percentage) |
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What is the only exception for the timing requirement for Closing Disclosures?
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Timeshares |
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What must the consumer provide to waive the 3 day waiting period before consummation?
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written request and description of bona fide finance emergency
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Are creditors allowed to charge fees for the preparation/delivery of Closing Disclosures |
NO
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When does Negative Amortization occur?
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when the borrower is allowed to pay less interest than the amount due- causing the unpaid amount to be added on to the loan balance- causing the principal balance to increase rather than decrease over time. |
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On what page of the Closing Disclosures does the consumer see whether there is an escrow account? |
Page 4 |
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What are the three changes to the Closing Disclosure that will trigger a new 3 business day waiting period?
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Change in the: - APR (Annual Percentage Rate) - Loan Product - Addition of prepayment penatly |
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Amount imposed on a consumer for settlement service cannot exceed what |
The actual amount received
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When may PMI (private mortgage insurance) be required?
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A down payment of less than 20% and a high LTV
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When do lenders terminate the payments of PMI
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78% LTV is reached (22% equity position)
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What types of loans are exempt from HPA (Homeowners Protection Act)?
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- Government-insured FA or VA loans - Loans protected by PMI paid for by the lender |
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Loans that do not meet the conforming loan limits established by Fannie Mae and Freddie Mac?
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High-Risk Loans |
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Once PMI is cancelled, when must all unearned premiums be returned to borrower? |
Within 45 day after cancellation/termination of PMI
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What is the penalty for violations of HPA (Homeowners Protection Act)
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Individuals: not to exceed $2,000 Class Action: not to exceed $500,000 OR 1% net worth |
