TILA Flashcards
What does TILA stand for?
Truth in Lending Act
TILA = Regulation
Regulation Z
ZILA
Purpose of TILA
Complete Cost of Credit
- established the required use of the Loan Estimate and Closing Disclosure
- Requires lenders to disclose the complete cost of credit to the consumer loan applicants.
Loans Covered under TILA
Applies to all credit transactions which meet the following conditions:
-The credit is offered to consumers
-The offer or extension of credit is made regularly
-The credit includes a finance charge or a written agreement stating that the loan may be repaid in MORE THAN 4 installments
-The credit is primarily for personal, family or household purposes
Both closed-end and open-end loans are covered.
Define APR
Annual Percentage Rate
True yearly cost of borrowing.
-Measure of the cost to the borrower that includes interest rate and finance charges expressed as a percentage.
Define “Finance Charge”
The cost of credit as a dollar amount. (A fee the buyer wouldn’t pay if it were a cash deal).
Define “Dwelling”
A residential structure or mobile home which contains 1-4 family housing units.
Define “Residential Mortgage Loan”
Security instrument created to finance the purchase or construction of a dwelling.
Right of Recession
-Provides 3 business day “cooling-off period” for consumers who use their primary residence as security for a refinance, home improvement or 2nd mortgage loan.(HELOC/REFIS ONLY)
HOME PURCHASES HAVE ZERO RIGHT OF RECESSION
-Each borrower must receive 2 copies of a Notice of Right to Rescind.
Refinancing scenarios with rights to rescind certain types of transactions:
Refinances on primary residences, including reverse mortgages.
-All borrowers receive 2 copies of the right to rescind notice, or they can have 3 years to rescind.
“seller contributions”
Sellers are typically allowed to contribute anywhere from 3% to 6% of the home’s purchase price towards the buyer’s closing costs.
CANNOT BE USED FOR DOWN PAYMENT
HOEPA stands for
Home ownership and Equity Protection Act
Purpose of HOEPA
HOEPA, or the Home Ownership and Equity Protection Act,
protects homeowners when they refinance or get home equity loans. The law attempts to prevent unfair practices from lenders who offer home equity loans.
Loans subject to HOEPA
- primary residence
- purchase (money mortgages)
- refinances
- second mortgages (aka home equity loans both open and closed)
Loans Exempt from HOEPA
-Reverse Mortgages
-Construction Loans
-Loans originated and directly financed by a Housing Finance Agency
•Loans originated under the U.S. Department of Agriculture’s (USDA’s) Rural Development Section 502 Direct Loan Program
•Mortgages secured by second homes, investment property
Three Separate High Cost HOEPA Coverage Tests/Triggers
The transaction’s annual percentage rate (APR)
• The amount of points and fees paid in connection with the transaction
• Prepayment penalties in the loan agreement
Higher Priced Mortgage Loan
In general, a higher-priced mortgage loan is one with an annual percentage rate, or APR, higher than a benchmark rate called the Average Prime Offer Rate.
First Lien Mortgage is higher priced if the APR is 1.5 percentage points more than the APOR
A subordinate-lien mortgage is generally “higher-priced” if the APR of this mortgage is 3.5 percentage points or more higher than the APOR.
Entity that enforces HOEPA
CFPB - Consumer Financial Protection Bureau
High Cost Mortgage
- The APR exceeds the APOR by more than 6.5 percent.
- The total lender/broker points and fees exceed 5 percent of the total loan amount. This 5 percent tolerance includes but is not limited to the following: origination fee, broker fee, processing fee, underwriting fee, document-preparation fee, wire fee and loan-servicing set-up fee.
- The loan has a prepayment penalty beyond 36 months from closing or the prepayment penalty exceeds 2 percent of the amount prepaid.
MLO Compensation
TILA Loan Originator Rule:
TILA Loan Originator Rule:
Prohibits a loan originator’s compensation from being based on the terms of a transaction (with limited exceptions) or a proxy for a transaction term
MLO Compensation
SAFE HARBOR
SAFE HARBOR
Provide a safe harbor to facilitate compliance with the anti-steering rule. The safe harbor is met if:
o The consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and
o The loan options presented to the consumer include the following: (1) the lowest interest rate for which the consumer qualifies;
(2) the lowest points and origination fees, and
(3) the lowest rate for which the consumer qualifies for a loan with no risky features, such as a prepayment penalty, negative amort
TILA deal with ______, _______, and _________ consumer loans.
TILA deals with CREDIT, APR and ADVERTISING of consumer loans.
How many days does escrow have to refund money if they utilize “right to resend”?
20 days
In general, how long should TILA disclosures be kept?
Loan Estimate?
Closing Disclosure?
2 years
Loan Estimate- 3 years
Closing Disclosures- 5 years
