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ACES > TILA > Flashcards

TILA Flashcards

1
Q

TILA

A

Truth in lending Act

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2
Q

What regulation is TILA?

A

Z; TILA the GODZILLA

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3
Q

When was TILA enacted?

A

1968

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4
Q

Who enforces TILA?

A

CFPB and FTC

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5
Q

What sub act is TILA under?

A

CCPA Consumer Credit Protection Act

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6
Q

What is the purpose of TILA?

A

C.A.R. Cost of credit, Advertising must be “truthful” and accurate, Right to rescind.

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7
Q

TILA applies to…

A

business that “regularly extend credit” (means more than 5 loans secured by real property per year)

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8
Q

What are exceptions of TILA?

A
  1. A.B.C.
  2. Organizational credit (ex. churches)
  3. Student Loans
  4. It does not apply to credit in excess of $57,200 unless the loan is secured by real property
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9
Q

What are the disclosures under TILA?

A
  1. Loan estimate or LE- due within 3 business days of application
  2. Open-end credit disclosure- due within 3 business days of application
  3. Closing disclosure or CD- due 3 business days PRIOR to closing
  4. Notice of Right to Rescind aka Right to Cancel- due at closing
  5. Early ARM disclosure- due within 3 business days of application
  6. Charm Booklet- due within 3 business of application
    LOCNEC
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10
Q

What is the CHARM booklet?

A

Consumer Handbook on Adjustable Rate Mortgages, ARMs 101 for the borrower, ONLY for ARMs

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11
Q

What is the Early ARM Disclosure?

A

Disclosure for every ARM product that the borrower inquires about

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12
Q

What is the Open End Credit Disclosure?

A

“What you should know about Home Equity Lines of Credit”, HELOC 101 for the borrower, ONLY for HELOC

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13
Q

What is the Notice of Right to Rescind?

A

PRINCIPAL, NON PURCHASE transactions only, 3 day cooling off period after closing

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14
Q

How many Notice of Right to Rescind must be sent?

A

2 copies of RTR per person who has ownership of the property

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15
Q

What happens if you FAIL to comply with notice of right to rescind?

A

RTR is extended for 3 years up at time of consummation/funding.

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16
Q

If borrower acts upon RTR, how soon must the lender return the money?

A

20 Calendar days

17
Q

What are the Interest Rate Disclosures Requirements?

A
  1. Lenders must supply borrowers with an initial rate adjustment notice the first time the interest rate adjusts 210-240 calendar days before the first payment at the new rate is due
  2. Every adjustment after the initial must be disclosed 60-120 calendar days prior
18
Q

What are Advertising Prohibitions under TILA?

A
  1. Lenders cannot advertise term that they don’t actually offer
  2. Tax Benefits for mortgages
  3. Misleading ads of the lending terms
  4. Can advertise the interest rate but it CANNOT be more conspicuous than the APR
  5. Trigger Terms- can use but there are exceptions
  6. APR can be advertised by itself
  7. APR- Annual Percentage Rate = Cost of credit expressed as a percentage (total cost of credit)
  8. Finance Charges = Cost of credit expressed as a dollar amount
19
Q

What is a Trigger Term for advertising?

A

Any advertisement that discloses hard numbers about the loan; except $0 down

20
Q

What must the ad state if there is a trigger term?

A
  1. APR
  2. Amount and percentage of down payments
  3. Terms of repayment
21
Q

What fees can affect the APR and are included in Finance Charge?

A 
LENDER/BROKER CONTROLED:
Origination
Processing
Underwriting
Discount Points
Mortgage Insurance/ Funding fee 
Commitment fee/ Lock in fee
Broker Fee (YSP)
Per Diem Interest
22
Q

What fees DO NOT affect APR and are NOT included in Finance Charge?

A 
THIRD PARTY FEES:
Title Insurance
Appraisal
Notary
Inspection fee
Escrow
Credit Report Fee
23
Q

What is HPML?

A

High Price Mortgage Loan

  1. Applies to primary residence for refinance or purchase of closed-end loans
  2. APOR= Average Prime Offer Rate
  3. APR Triggers or Threshold
24
Q

What section is HPML?

A

Section 35 under TILA

25
Q

What are the APR triggers and thresholds for HPML?

A
  1. 5% above the APOR for 1st lien
  2. 5% above the APOR for 2nd lien
  3. 5% above the APOR for Jumbo Loans
26
Q

If a loan is considered HPML…

A
  1. Must verify ATR
  2. Prepayment penalty limited to the first 2 years*****
  3. Escrow is required for the first 5 years (unless the property is a condo or co-op)
27
Q

What is HOEPA?

A

Home Ownership and Equity Protection Act

AKA HIGH COST

28
Q

What section is HOEPA?

A

Section 32 under TILA

29
Q

What is the purpose of HOEPA?

A
  1. Created to help combat predatory lending practices
  2. Applies to primary residence only: purchase or refinance of closed-end loans
  3. Special HOEPA Disclosures- due 3 business days prior to closing
30
Q

What are the APR triggers and thresholds for HOEPA?

A
  1. 5% above APOR for 1st lien

8. 5% above APOR for 2nd lien

31
Q

What are the points and fees thresholds for HOEPA?

A
  1. 5% or more of the loan amount (loans $21,549 or more)

2. Lesser of $1,077 or 8% of the loan amount (loans under $21,549)

32
Q

What is the prepayment penalty triggers for HOEPA?

A
  1. If there is a prepayment penalty on the loan after the first 36 months
  2. If the prepayment penalty is more than 2% of the loan amount
33
Q

If a trigger is set for HOEPA the loan cannot have…

A
  1. Balloon payment
  2. Neg Am
  3. Prepayment penalties
  4. Increase of rate after default
  5. Acceleration of debt
  6. Refinancing within 1 year UNLESS it benefits borrower
  7. Direct payment to home improvement contractors
34
Q

In order to get a HOEPA loan the borrower must…

A
  1. Verify ATR

2. Receive counseling

35
Q

Can a HOEPA loan be sold on the secondary market?

A

Yes but must let the buyer know it is a HOEPA loan

36
Q

What are exceptions to HOEPA?

A

HECM (reverse mortgage, 2nd Homes/ Investment properties, Construction Loans

37
Q

What are the penalties under TILA?

A

Damages plus attorney costs (damages can be twice the finance charges)
Civil Charges: $5,000 per individual and or 1 year in prison

ACES (22 decks)

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