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SAFE ACT Prep > TILA > Flashcards

TILA Flashcards

1
Q

What does TILA stand for?

A

Truth-in-Lending Act

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2
Q

What regulation is TILA?

A

Regulation Z

TILA GODZILLA!!!

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3
Q

What regulatory agency is responsible for TILA?

A

Board of Governors of the Federal Reserve (FRB)

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4
Q

Who administers and enforces TILA?

A

Consumer Financial Protection Bureau (CFPB)

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5
Q

What is the purpose of TILA?

A
  • To protect consumers by disclosing the costs and terms of credit
  • Create uniform standards to encourage consumers to compare different options
  • Ensure advertising is truthful and not misleading
  • Provide borrowers with a right to rescind certain types of mortgage transactions

C - Cost of Credit/Uniform Disclosures,
A - Advertising = Truthful & Accurate
R - Rescission

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6
Q

What does APR stand for? What is it?

A

Annual Percentage Rate

It is the cost of credit expressed as a percentage. It includes the interest rate and the costs of financing.

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7
Q

What is a “Finance Charge”?

A

The cost of credit over the life of the loan, expressed as a dollar amount.

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8
Q

True or False? A CHARM booklet should be disclosed to every borrower.

A

False

A CHARM booklet which stands for “Consumer Handbook on Adjustable Rate Mortgages” only needs to be disclosed if the borrower receives an ARM

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9
Q

True or False? The borrower should be sent the “Early ARM Disclosure” for every inquiry into an ARM loan?

A

True

The borrower should receive this disclosure, also known as the “Variable Rate Program Disclosure” for every ARM product they inquire about.

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10
Q

What are the other names for the “Open-end Credit Disclosure” and for what loans are they used?

A
  • “What you should know about home equity lines of credit”
  • “When your home is on the line”

They are used for HELOC loans

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11
Q

TILA is “sub act” of what ACT?

A

CCPA (Consumer Credit Protection Act)

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12
Q

To whom does TILA apply?

A

TILA applies to all business that regularly offer or extend credit for personal, family or household purposes.

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13
Q

To be covered by TILA, credit offered must be subject to a ___________ or payable by written agreement in more than __ installments.

A
  • Finance charge

- 4 installments

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14
Q

True or False? TILA does not apply to agricultural, business, commercial, organizational or student loans.

A

True

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15
Q

When does TILA apply to credit in excess of $25,000?

A

When it (the loan) is secured by real property

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16
Q

Unless increased by state law or regulation, lenders must retain evidence of compliance with TILA disclosure for how many years?

A

3 years

17
Q

Advertisements containing “trigger terms” all have this in common.

A

They contain hard numbers

18
Q

True or False? If only the APR is advertised, then additional disclosures are not required under TILA.

A

True

However the APR, Amount and Percentage of Down Payment & Terms of Repayment must be disclosed if the following trigger terms are used: Amt/% of any down payment, Amt of mo. pymnt, # of pymts or period of repymnt, Amt of any finance charge.

19
Q

For what loans does the Notice of Right to Rescind (AKA Right to Cancel) apply?

A
  • Loans secured by the borrower’s primary residence
  • HELOCs, home improvement , and constructions loans

*It does not apply to purchase transactions

20
Q

How many copies of the RTC must be provided for rescindable transactions?

A

Two copies of the notice must be given to each party with an ownership interest in the residence

21
Q

How long is the “cooling off” period on a rescindable transaction?

A

3 business days

22
Q

If two copies of the RTC are not provided at closing, how long is the rescission period extended to?

A

Three (3) years

23
Q

How many consumers need to rescind for a rescindable transaction to be voided?

A

1 consumer

24
Q

True or False? Mortgage Broker’s fees are always included in the finance charge?

A

True

They are always included, even if the lender does not require the use of the broker’s services

25
Q

Give four examples of fees included in the finance charge.

A
  • Broker’s Fees
  • Interest
  • Loan origination fees and discount points
  • Premiums for credit life or credit disability insurance
  • Premiums for property and liability insurance
  • PMI
  • Transaction fees
  • Processing fees
  • Underwriting fees
26
Q

Give four examples of charges not included in the finance charge.

A
  • Application fee
  • Appraisal & credit report fees
  • Doc prep fees
  • Notary fees
  • Seller’s points
  • Title examination fee
  • Title insurance fee
27
Q

What does HPML stand for?

A

Higher-Priced Mortgage Loan

28
Q

Higher-Priced Mortgage Loans are also referred to as what?

A

Section 35 loans

29
Q

What does APOR mean?

A

Average Prime Offer Rate

30
Q

What are the thresholds for an HPML when it exceeds the APOR as stated under TILA?

A
  • 1.5% for first lien loans
  • 3.5% for junior lien loans
  • 2.5% for first liens on JUMBO mortgages
31
Q

When do the APOR thresholds for HPMLs not apply?

A
  • Initial construction of a dwelling
  • Temporary/bridge loans
  • Reverse mortgage (HECM)
  • HELOC
32
Q

What are the three (3) additional requirements for HPMLs?

A
  • Lenders must verify repayment ability
  • Prepayment penalties are generally prohibited unless limited to the first 2 years of the loan
  • Escrow account for taxes and insurance is required, unless property is a Co-op or a Condo (required for at least 5 years)
33
Q

What is the penalty for violating TILA?

A

Willful and knowing violations are subject to a criminal penalty of $5,000 and/or 1 year in prison

34
Q

What are four (4) of the disclosures required under TILA?

A

C - Charm Booklet (Consumer Handbook on ARMs)
O - Open-end Credit Disclosure
N - Notice of Right to Rescind
E - Early Arm Disclosure

35
Q

What is the name for terms used in advertising that necessitate additional information or disclosures?

A

Trigger terms

36
Q

True or False? The right to rescind applies to closed-end loans only?

A

False

It also applies to HELOCs, home improvement and construction loans

37
Q

TILA requires disclosures in advertising to be stated or outlined:

a) Clearly and conspicuously
b) With equal prominence and clarity
c) At the time of application
d) Withing 3 business days after application

A

A

TILA requires specifically for the terms to be displayed clearly and conspicuously

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