TILA Flashcards
- The Truth-in-Lending Act (TILA) was passed by Congress in 1968 as part of the __________________
Consumer Credit Protection Act.
- TILA is administered by the _____________________
Consumer Financial Protection Bureau.
- TILA was implemented by the _____________ as Regulation Z.
Federal Reserve Board
- TILA promotes the informed use of credit by disclosing finance charges in a uniform manner using the _____________.
Annual Percentage Rate (APR).
- TILA was enacted to protect __________________.
consumers during credit transactions.
- TILA deals with _______, ________, & ___________ of consumer loans.
credit, APR, & advertising
- Regulation Z applies to residential mortgages (_________ units) and does not include ____________________.
1-4 , commercial or other nonresidential loans.
- TILA applies to credit transactions payable in more than ________ installments.
four (4)
- TILA Disclosures include : (BRAWL CCT)
Loan Estimate (LE), Closing Disclosure (CD), Consumer Handbook on Adjustable-Rate Mortgages (CHARM Booklet), the When Your Home is on the Line Booklet, ARM Disclosures, Notice of the Right to Rescind Disclosures, and Balloon Payment disclosures.
- Regulation Z covers three general areas:
disclosure of financing charges, distribution of the Consumer Handbook on Adjustable-Rate Mortgages (CHARM) booklet, and the right of rescission.
- The CHARM booklet is required to be provided to the borrower when he/she received an ___________
adjustable-rate mortgage.
- The “When Your Home is on the Line” disclosure is required to be provided to the borrower if he/she received a ___________________.
Home Equity Line of Credit (HELOC) or Home Equity Line of Credit Loan.
- The Transfer of Ownership Disclosure requires that entities that purchase or acquire mortgage loans notify the borrower and provide the name, address, and telephone number of the new owner of the mortgage, within ____ days of acquisition.
30
- The Transfer of Ownership Disclosure only applies to _______ mortgage.
primary
- Do not confuse the Transfer of Ownership Disclosure with the Transfer of Servicing Disclosure. The owner of the loan and the servicer of the loans are frequently _____________.
separate entities
- ARM Disclosure - Some disclosures under TILA are specific to adjustable- rate mortgage loans (ARMs). Loan servicers must provide a borrower with an ARM at least ____ days’ notice before an interest rate change occurs if that change will result in a new payment.
60
- The Loan Estimate (LE) is a TILA disclosure and is required to be provided to the borrower at or within ____ days of the initial application. It provides the borrower the _______________________________.
three, potential/estimate of what the closing cost will be.
- According to TILA – a completed application requires use of a ___________, which discloses settlement service provider costs, the initial Annual Percentage Rate of the loan, Estimated Cash to Close the transaction, and other loan features
3-page Loan Estimate
- The Closing Disclosure (CD) is a TILA disclosure which is required to be provided to the borrower _________days prior to loan settlement (doc signing), with a final copy of the CD provided at the actual settlement (doc signing). It provides the borrower with ______________.
three, the actual closing cost.
- TILA requires the delivery of the _____ page Closing Disclosure, which contains the final terms of the mortgage loan, loan costs, and various loan disclosures __ days prior to loan consummation. The Closing Disclosure combines the ______________________.
five (5), three (3)
HUD 1 Settlement Statement and the Final Truth in Lending disclosures.
- The APR is not simply the interest rate that appears in the promissory note, known as the note rate. Rather it reflects certain finance charges associated with the loan, spread out over the life of the loan. Therefore, the APR is generally ______ than the note rate.
higher
- APR disclosure must occur within _________ days of receiving a signed loan application.
3 business
- Another word used for APR is _________
Effective Rate.
- Other words used for Interest Rate are _________ or ______________
Note Rate or Nominal Rate.
- Total Interest Percentage (TIP) is _____________________________
total interest being charged on the loan, expressed as a percentage. This is different from the APR, which is the total interest + all fees, expressed as a percentage.
- Whenever an MLO quotes an interest rate to a consumer – whether orally or in writing, including advertisements, websites, etc. – TILA requires that the ______ must be disclosed, even when the consumer simply calls for an interest rate quote.
APR
- The Mortgage Disclosure Improvement Act (MDIA) states that: Initial disclosures are required within _______ days of receipt of completed application. Earliest consummation is on the ____ business day after disclosures delivered/mailed. If redisclosure is required, consumer must receive corrected disclosure at least _____ days before loan can be consummated.
3 business, 7th, 3 business
- According to TILA – the soonest that a loan can close is ________ business days after the disclosures have been delivered.
7 (seven)
- REDICLOSURE is usually triggered when there is a change in the APR. The APR is considered accurate if it does not vary (increase or decrease) from the APR initially disclosed by more than:__________ for a regular transaction (30yr fixed) or more than_________ for an irregular transaction (anything other than a 30yr fixed).
1/8% (.125), 1/4% (.25)
- TILA deals with “_____________” of consumer loans.
advertising
- TILA states that in advertising of consumer loans, if any triggering term is specified, then the ___________________ must also be disclosed.
APR and the amount and terms of repayment
- Examples of triggering terms include statements such as:
$500 down payment, $1,500 monthly payment, 5% interest rate, etc.
- If an advertisement contains the _____, no other disclosure is needed (it does not “trigger” additional disclosures).
APR
- TILA is the law that established the “Right of Rescission” rule. This rule provides a _____________________________.
3-business day cooling-off period for a consumer who uses his primary residence as security for a refinance, home improvement loan, HELOC, or second mortgage loan.
- According to TILA – there is “No Right of Rescission” on a __________________________.
purchase, 2nd home or investment property.
- According to TILA – each borrower must receive _________ copies of the notice/right to rescind.
two (2)
- If a borrower was not properly notified of their “right to rescind”, the rescission period could be extended for up to _____ years.
three
- The rescission period expires at __________ of the 3rd day. The day of signing “is not” day one – it’s the next day.
midnight
- If money was collected and a borrower rescinds, escrow has ____ days to return any money collected to the borrower.
20
- The Truth-in-Lending Disclosure must be delivered at least______________ days prior to funding for reverse mortgages, equity lines of credit, mortgages secured by a mobile home, and dwellings not attached to land.
7 business
- The Truth-in-Lending Disclosure must be delivered at least 7 business days prior to funding for _________________________________________.
reverse mortgages, equity lines of credit, mortgages secured by a mobile home, and dwellings not attached to land.
- A ____________ is a fee the buyer would not pay if it were a cash deal. For example, wire transfers and mortgage interest payments contribute to the calculation of the APR, while hazard insurance and home inspections do not.
finance charge
- Finance charges are the costs of obtaining __________________, expressed as a dollar amount.
credit paid by the consumer
Fees not included in APR (TENACTS)
T- Title Insurance
E- Escrow
N- Notary Fee
A- Appraisal
C- Credit Report
T- Termite Inspection
S- Seller Credits
Fees included with APR (PODIUM)
P- Processing Fees
O- Origination Fees
D- Discount Points
I- Interest (Pre-paid/ Per Diem)
U- Underwriting Fees
M- Mortgage Broker Fees
- According to the Truth-in-Lending Act, the term ________ applies to the satisfaction of an existing obligation and its replacement by a new obligation.
refinance
- According to the Truth-in-Lending Act, a __________ is defined as a residential structure which contains between one and four units. The units do not need to be attached to real property. A dwelling may also be an individual condominium unit or cooperative unit.
dwelling
- According to the Truth-in-Lending Act, _______________________ are charges which are paid separately before or at the time of consummation or which are withheld from the proceeds of the loan.
prepaid finance charges
- The _____________________________ amends the Truth- in-Lending Act and establishes requirements for certain loans with high rates and/or high fees.
The Home Ownership and Equity Protection Act of 1994 (HOEPA)
- The Home Ownership and Equity Protection Act of 1994 (HOEPA) amends the Truth- in-Lending Act and establishes requirements for certain loans with ______________.
high rates and/or high fees.
- What is used to determine if loan is a Section 32 (High Cost) or a Section 35 (High Priced) loan? The loan’s APR is compared to the _______ to see if it triggers it to be a Section 32 or Section 35 loan.
APOR – Average Prime Offer Rate, APOR
- A loan will be considered a High Cost (Section 32) loan if its APR exceeds the APOR by more than ___% for a first lien of $_______ or higher, ___% on a first lien less than $______, and or ___% for a subordination lien,
6.5%, $50,000
8.5%, $50,000
8.5%
- In addition, a loan will be considered a High Cost (Section 32) loan if the points and fees exceed the following thresholds: ___% of the loan amount for loans equal to or greater than $_____ or ____% of the total loan amount, or $_____ for loan amounts less than $_____.
5%, $21,549
8%,
$1,077, $20,579
- A loan will be considered a High Priced (Section 35) loan if its APR exceeds the APOR by more than _________________________________________.
1.5%, 2.5% for jumbo first-lien loans, and 3.5% for subordinate liens.
- Section 35 Loans (High Priced Loans) are sometimes referred to ____________________________.
“HPML” loans – High Priced Mortgage Loans.
- Section 35 High Priced loans require the following:
impound account for the first five years, no prepayment penalty (unless it is limited to the first two years of the loan) and the lender must verify the borrower’s ability to repay the loan.
- HIGH-COST (Section 32) home loans have the following restrictions:
most balloon mortgages are prohibited, the borrowers must prove an ability to repay the loan, and the borrower must speak to a HUD-approved housing counselor.
- ____________ penalties are strictly prohibited in high-cost loan.
Prepayment
- In a HIGH-PRICED loan (Section 35) - Lenders must require a property tax and hazard insurance escrow account to be maintained for a minimum of ____ years if there is a first-lien high-priced home loan. The account can be canceled after ____ years if the LTV is 80 percent or less, and the borrower is current on the mortgage payments.
five, five
- Prepayment penalties generally prohibited on higher-priced loans unless it is limited to the first ____ years of the loan.
two
- The_____________________ is an amendment to the Truth-in-Lending Act and was written by the Consumer Finance Protection Board to address issues regarding loan originators’ compensation, expand the SAFE Act and implement additional issues identified in the Dodd-Frank Act.
Loan Originator Compensation Rule
- The Loan Originator Compensation rule prohibits ______________. __________________ means that a LO is restricted to getting paid by either the borrower OR the lender – but NOT BOTH.
Dual compensation
- The Loan Originator Compensation rule YSP (yield-spread premium) as a form of compensation. This is a form of compensation wherein brokers and originators were able to increase their compensation by providing the borrower an interest rate higher than that which they qualified. Based on the RULE – compensation cannot be based on the _________________.
loan terms the borrower receives.
- A ___________mortgage is one that follows stated guidelines intended to reduce a lender’s potential liability
qualified
- A qualified mortgage has no excess points and fees. Points and fees paid by the borrower must not exceed ____of the total amount borrowed, in order to be considered a qualified mortgage.
3%
- A qualified mortgage is a home loan that meets certain standards set forth by the __________ - one in which creditors are presumed to meet __________ requirements if they make a Qualified Mortgage.
federal government, Ability-to-Repay
- A qualified mortgage has no _______ features. No interest-only loans, no negative amortization loans, no balloon payments.
toxic
- A qualified mortgage must have terms of ___ years or less.
30
- A qualified mortgage limits the debt-to-income ratio – qualified mortgages granted to borrowers must not have a back-end debt-to-income ratio higher than ____%.
43%
- The eight (8) items that a lender must consider determining if a borrower meets the ability-to-repay (ATR) requirements include an evaluation of the following (COMEDIES):
C- Credit
O- Other Debt
M- Monthly Mortgage
E- Employment
D- Debt to Income DTI
I- Income- assets
E- Expenses- Monthly Taxes/insurance
S- Simultaneous Mortgage
- Penalties for violation of TILA - $___________ per day for a single violation, $________ per day for reckless violations, $__________ per day for knowingly violating TRID rules.
$5,000
$25,000
$1,000,000
- Business day: ___________________________ (According to TILA) - except for the Loan Estimate, which defines a business day as ANY day that the creditors office is open for business. For example, if a creditor’s offices are open to the public on Sundays and every Veterans Day, these days are considered business days.
All calendar days except Sundays and legal public holidays
- Prepaid finance charges are used to calculate the APR. The following prepaid finance charges ARE included in the calculation:
• Origination fees
• Discount points
• Tax service fees
• Underwriting fees/Processing fees
• Prepaid/per diem interest
• Mortgage insurance premium
• Mortgage insurance impounds/reserves
• Warehouse fees
• VA funding fees
• FHA UFMIP
• Buydown
• Flood certification fees
• Closing fees
• Courier fees (Lender)
