TILA Flashcards
What does TILA stand for?
Truth-in-Lending Act
What regulation is TILA?
Regulation Z
TILA GODZILLA!!!
What regulatory agency is responsible for TILA?
Board of Governors of the Federal Reserve (FRB)
Who administers and enforces TILA?
Consumer Financial Protection Bureau (CFPB)
What is the purpose of TILA?
- 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
What does APR stand for? What is it?
Annual Percentage Rate
It is the cost of credit expressed as a percentage. It includes the interest rate and the costs of financing.
What is a “Finance Charge”?
The cost of credit over the life of the loan, expressed as a dollar amount.
True or False? A CHARM booklet should be disclosed to every borrower.
False
A CHARM booklet which stands for “Consumer Handbook on Adjustable Rate Mortgages” only needs to be disclosed if the borrower receives an ARM
True or False? The borrower should be sent the “Early ARM Disclosure” for every inquiry into an ARM loan?
True
The borrower should receive this disclosure, also known as the “Variable Rate Program Disclosure” for every ARM product they inquire about.
What are the other names for the “Open-end Credit Disclosure” and for what loans are they used?
- “What you should know about home equity lines of credit”
- “When your home is on the line”
They are used for HELOC loans
TILA is “sub act” of what ACT?
CCPA (Consumer Credit Protection Act)
To whom does TILA apply?
TILA applies to all business that regularly offer or extend credit for personal, family or household purposes.
To be covered by TILA, credit offered must be subject to a ___________ or payable by written agreement in more than __ installments.
- Finance charge
- 4 installments
True or False? TILA does not apply to agricultural, business, commercial, organizational or student loans.
True
When does TILA apply to credit in excess of $25,000?
When it (the loan) is secured by real property
Unless increased by state law or regulation, lenders must retain evidence of compliance with TILA disclosure for how many years?
3 years
Advertisements containing “trigger terms” all have this in common.
They contain hard numbers
True or False? If only the APR is advertised, then additional disclosures are not required under TILA.
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.
For what loans does the Notice of Right to Rescind (AKA Right to Cancel) apply?
- Loans secured by the borrower’s primary residence
- HELOCs, home improvement , and constructions loans
*It does not apply to purchase transactions
How many copies of the RTC must be provided for rescindable transactions?
Two copies of the notice must be given to each party with an ownership interest in the residence
How long is the “cooling off” period on a rescindable transaction?
3 business days
If two copies of the RTC are not provided at closing, how long is the rescission period extended to?
Three (3) years
How many consumers need to rescind for a rescindable transaction to be voided?
1 consumer
True or False? Mortgage Broker’s fees are always included in the finance charge?
True
They are always included, even if the lender does not require the use of the broker’s services
Give four examples of fees included in the finance charge.
- 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
Give four examples of charges not included in the finance charge.
- Application fee
- Appraisal & credit report fees
- Doc prep fees
- Notary fees
- Seller’s points
- Title examination fee
- Title insurance fee
What does HPML stand for?
Higher-Priced Mortgage Loan
Higher-Priced Mortgage Loans are also referred to as what?
Section 35 loans
What does APOR mean?
Average Prime Offer Rate
What are the thresholds for an HPML when it exceeds the APOR as stated under TILA?
- 1.5% for first lien loans
- 3.5% for junior lien loans
- 2.5% for first liens on JUMBO mortgages
When do the APOR thresholds for HPMLs not apply?
- Initial construction of a dwelling
- Temporary/bridge loans
- Reverse mortgage (HECM)
- HELOC
What are the three (3) additional requirements for HPMLs?
- 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)
What is the penalty for violating TILA?
Willful and knowing violations are subject to a criminal penalty of $5,000 and/or 1 year in prison
What are four (4) of the disclosures required under TILA?
C - Charm Booklet (Consumer Handbook on ARMs)
O - Open-end Credit Disclosure
N - Notice of Right to Rescind
E - Early Arm Disclosure
What is the name for terms used in advertising that necessitate additional information or disclosures?
Trigger terms
True or False? The right to rescind applies to closed-end loans only?
False
It also applies to HELOCs, home improvement and construction loans
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
TILA requires specifically for the terms to be displayed clearly and conspicuously
