Affinity 800 Facts TILA Worksheet 1-40 Flashcards
What does TILA stand for & which 2 agencies passed it?
Truth in Lending Act
Passed by Consumer Credit Protection Act (CCPA) & implemented by Federal Reserve Board
Who administers TILA & what Regulation is TILA?
CFPB administers TILA (Consumer Financial Protection Bureau) & TILA is Regulation Z
What is the main purpose of TILA & what is it’s acronym?
TILA was put in place to protect consumers during credit transactions (be truthful & not misleading when it comes to advertising about credit) & deals with (CARFAC):
Credit
APR – for the sake of uniformity use APR to define finance charges
Right of Rescission
Finance charges Disclosure (similar to APR)
Advertising
CHARM booklet
When does TILA apply?
TILA is for residential & personal use mortgages (1-4 units), credit transactions of more than 4 installments
When does TILA not apply?
TILA doesn’t apply to commercial & other non-residential mortgages
How many installments are required for TILA to kick in?
More than 4 installments
What are the TILA disclosures & what is the acronym
TILA disclosures – CRAWL CTB (CRAWL CuTe BABY):
Closing Disclosure
Right to Rescind Disclosure
ARM Disclosures
When your Home is on the Line – HELOC or Home Loan or REFI
Loan Estimate
CHARM Booklet – when homeowner receives an Adjustable Rate Mortgage (ARM)
Transfer of Ownership Disclosure
Balloon Payment Disclosures
What is the Transfer of Ownership Disclosure & when does it apply?
Transfer of Ownership Disclosure – only applies to primary mortgage – when there is a new owner of a mortgage (lender to lender) – must notify borrower within 30 days of acquisition
How does the Transfer of Ownership Disclosure differ from the Transfer of Servicing Disclosure?
Transfer of Ownership discloses a new lender while Transfer of Servicing shows new servicer
How far in advance must a loan servicer notify consumer about rate change with ARM?
Sent 60 days notice before the rate changes but no earlier than 120 days (affects their payments)
What is the purpose of a Loan Estimate (LE), how many pages is it & when does borrower get it?
Loan Estimate/LE is 3-page potential/estimate of closing costs will be for the consumer that they get at or 3 business days after receiving a completed application
What is on a LE
LE disclosure includes (what you should be getting & how much $ you need to close):
APR (initial)
Estimated Cash to Close the transaction
Other loan features/terms
Settlement service provider costs
What is a Closing Disclosure, how many pages is it?
Closing Disclosure/CD is a 5-page disclosure that is provided to borrower 3 business days before closing & a final CD at closing/doc signing – provides borrower with actual closing costs
What is on a CD
Closing Disclosure includes:
Final terms of the mortgage loan
Loan costs
Various loan disclosures
What is the APR?
Annual Percentage Rate/APR % version of the $ finance charge, not just the interest rate – it’s the IR
+ finance charges spread out over the loan
What is higher the APR or the Interest Rate (IR)?
APR is higher than the interest rate
What is expressed as a % and is the true cost of lending?
APR - relationship between the cost of borrowing and total amount financed as a %
What are other words for Interest Rate?
Interest Rate = Note Rate or Nominal Rate
What is the definition of par rate?
Par Rate- the rate given that doesn’t require lender credits or discount points
(no adjustments)
What is another word for APR?
APR= Effective Rate
What is Total Interest Percentage (TIP) & how does it differ from APR?
TIP - the total interest being charged as a % vs. APR is the interest + finance charges as a %
Per TILA what must you give if a client asks you for the Interest Rate?
You can’t just disclose the Interest/Nominal/Note Rate – you MUST disclose the APR as well
What is Mortgage Disclosure Improvement Act (MDIA)?
MDIA is the 3-7-3 rule that says initial disclosures must be sent out within 3 business days of
completed application, loans can’t close before 7 business days after disclosures sent/mailed and if Re-disclosure happens need to wait another 3 business days.
According to TILA when is the soonest a loan can close?
Loan can only close after 7 business days
When & why are Redisclose triggered & are they a good thing?
Re-disclosure triggered when there is a change in APR IF:
30 year conventional fixed mortgage changes more than 1/8% (0.125)
Irregular (anything other than 30-year conventional fixed): 1/4% (0.25)
What are examples of triggering terms that sets off a disclosure with advertising?
TILA- Advertising – if you use triggering terms such as $500 down payment, $1,500 monthly payment then you have to disclose the APR & amount & terms of repayment
What is not a triggering term & therefore doesn’t require additional disclosures?
If advertising has APR – no other disclosures are needed ex: 5% APR, easy monthly payments
TILA established the Right of Rescission Rule- what is it?
3-day cooling period if PRIMARY residence used for refi, HELOC, Home Loan, 2nd mortgage loan
Can you use a Right of Rescission on a purchase, 2nd home or investment property?
NO- only your existing primary property
How many copies do you give re: Rescind & how many borrowers does it take to rescind?
Each borrower must receive 2 copies & it only takes 1 person to back out
When does the Right to Rescind expire?
Midnight on the 3rd business day & day of signing doesn’t count.
Ex: signed Monday – RR expires Thurs midnight
If a lender fails to give a borrower the Right to Rescind/Right to Cancel disclosure how long does the borrower have to rescind the loan?
Borrower has 3 years to rescind if they never received the Right to Rescind disclosure
If $ was collected and a borrower rescinds – how many days does escrow have to return the $?
20 days to return $ if borrower rescinds
How many days does the TIL Disclosure have to be delivered w/ mobile, reverse, HELOC, equity lines of credits, dwellings not attached to land before closing?
7 business days before closing
Per TILA what is a dwelling?
Dwelling - residential structure 1-4 units that don’t need to be attached to real property & can be a condo or coop unit (anywhere someone lives)
What is the Loan Originator Compensation Rule & what law is it amended from?
Amendment of TILA – by CFPB with regards to how LOs are compensated, expand the SAFE Act & implement issues identified in Dodd Frank Act. Prohibits dual compensation
What is Dual Compensation Rule?
LO can only be paid by ONE party – either lender or borrower – not both
What is Yield Spread Premium (YSP)?
YSP is a form of compensation for Loan Originators – when a lender gives an LO incentive to get a borrower to agree to higher IR and the LO gets a kickback while lender unfairly gets more $ in the form of APR - now the YSP benefit goes to the borrower
What are the penalties for violating TILA?
Penalties for violating TILA:
A) 5K/day for single violation
B) 25K/day reckless violation
C0 1M/day knowingly violating TRID
Per TILA what is a business day?
TILA- all calendar days except Sundays & Legal Holidays (except LE/Loan Estimate: any day open to the public)
