TILA - Closed End Credit Flashcards
Disclosure for closed end loans must be given
Before consummation, which is the point a consumer becomes contractually obligated to the credit transaction
For loans secured by real property an application consists of
Name Income SSN Property address Estimate of property value Mortgage loan amount soght
For mortgage loan (not revere mortgage) secured by consumer dwelling (RESPA) a loan estimate must be delivered or mailed to consumer no later than
7 business before the consummation of the transaction
Reverse mortgages require what kind of early disclosure
Good faith estimate no later than the third business day after creditor receives the written application
Early disclosures do not apply toc
Home equity lines nor to timeshare planes
Creditor must provide corrected disclosures with all the changes terms if the APR changes
1/8 of a percent in a regular transaction
1/4 of a percent in a irregular transaction
Corrected transactions are assumed to be received
3 days after mailing unless delivered in person
All disclosures must contain the following sentence
You are not required to complete this agreement merely because you received these disclosures
You Cannot impose a fee with any application for a transaction subject to respa and secured by consumer dwelling before
The consumer received the good faith estimate or the loan estimate. Fees for credit reports are exempt from this
A business day is defined as
Any day except Sunday and a legal holiday
Waiver of waiting period can occur for a bon a fire emergency if consumer provides
A written, dated, waiver that describes the boba fide personal emergency
For variable rate mortgage secured by a dwelling and the term is more than one year certain disclosures must
be given before application
If variable rate mortgage and the loan was received in the phone or broker
You have 3 business days to provide disclosure
The creditor may delay the disclosures until the due date of the first payment for mail or telephone apps if
Certain information is made available in electronic form
Cash price
Apr and if it can increase
If information on which a disclosure is based is unknown
The creditor must estimate the information and state the disclosure is an estimate
For demand obligations, disclosures must be based on an assumed maturity of a year
Disclosures must be
In writing
Conspicuously segregated from all other disclosures
Disclosures may be provided in electronic form subject to consumer consent
Variable rate disclosures must be given in a closed end transaction where the APR
May increase after consummation
Circumstances of when it may increase
Any limitation of the increase
The effect of an increase
Finance charges include
Interest Points Closing agent charges Premiums for insurance Broker fees Chargers for third party work
For closed end transactions secured by real property other than time share, lender must disclose that
There is no guarantee the consumer can refinance the transaction to lower the interest rate or periodic payments
Other disclosure requirements
Identify the creditor making the decision
Late payment charges that may be imposed states as the dollar amount or percentage of the payment
Other information may be found in the contract
Disclosures must be given for what post consummation events
Refinancing with change in terms
Assumptions
Rate adjustments with corresponding change in payment amount
Discloures must be provided at least 60 days but not more than 120 days first payment is due
Creditor must provide consumer with disclosures in connection with the initial rate adjustment at least
210 but not more than 250 days before payment at the adjusted level is due
Right of revisions apply to transactions where a lien is taken on the consumer
Principal dwelling and the loan is not for purchase, acquisition, or initial construction ( residential mortgage transaction)
Right of recession does not apply to a refinancing by the
Same creditor
Anyone who has ownership interest in the dwelling has the right to rescind within
3 business days
3 business days for right of recession starts after at least three of the following events
Consummation of the transaction
Delivery of the material TIL
Delivery of the right to rescind
Notice of the right to rescind must
Be on seperate document
Disclose the security interest being acquired
Disclose the consumer has the right to rescind
Explain the effects of rescission
Disclose the date the decision period ends
How many recession copies must be given to each consumer with ownership in the property
2
If notice provided electronics, the. Only 1 is required
Until the recession ends the creditor may not
Disburse funds
Perform any services
Deliver any materials
Effects of valid recession
Security becomes void
Within 20 days creditor must return money
Once the money is returned, then the consumer has to return property and money to the lender
Failure to properly provide the right of recession affords the consumer an additional
3 years to rescind the transaction
Advertising should
Must state specific terms offered by the bank
If if states finance charge, it must state APR
In a closed end consumer loan secured by real property, other than a reverse mortgage, the creditor must provide a
Loan estimate unless the mortgage broker provides one
For a mortgage loan, the loan estimate must be delivered no later than the third business day after the creditor receives the
Consumer application
The final disclosure on mortgage loans must reflect the actual terms of the transaction an be provided no later than
3 business days before consummation
Any disclosure not provided to the consumer in person will be
Considered to be received by the consumer three business days after they are delivered or placed in the mail
If disclosures become inaccurate before consummation
The creditor must permit the consumer to inspect the disclosure at least one business day immediately preceding consummation
If any of the following become inaccurate, new disclosures and a new waiting period are required
Apr
Loan product changes
Prepayment penalty added
If amounts paid by the consumer exceed the amounts disclosed in the estimated disclosures in an amount greater than the allowed tolerance, the creditor must refund the excess
In 60 days after consummation
Creditors must provide a ________ Special information booklet to a consumer who applies for a consumer loan secured by real property
Respa. Note. The book Must be mailed or delivered in 3 business days unless loan is declined
Must be give to the contact the time of application or before a non refundable fee is paid
CHARM book and s loan program disclosure for each ARM loan
The loan program book must contain
Fact interest , payment, or terms may change
How interest was calculated
Consumer should ask about current margin and interest rate
Historical example
Requirements for High Cost Mortgage
Secured by principal dwelling
Apr will exceed sports by 6.5% or 8.5% if the loan is less than 50k.
Or 8.5% for a junior lien
Total points and fees more than 5% of loan transactions of 20k or more
8% or more if loan transaction less than $20k
Exceptions to high cost mortgages are
Reverse mortgages
Intial construction of a dwelling
Bridge loan less than 12 months
For a high cost mortgage, disclosures must be provided at least
3 business days
High cost mortgages must not contain the following provisions
Ballon payments
Negative amortization
An increase in rate after defaults prepayment penalty
A due on demand clause (unless fraud or security of collateral is impacted)
Creditor may not open a high cost plan for a consumer without taking in consideration of the following for ability to repay
Income
Employment
Assets
Collateral
Current obligations
A certificate that the consumer has obtained credit counseling from a HUD certified counselor for
High cost mortgage
Early high cost mortgage disclosures
Must be provided three days in advance
Must have APR
For closed end loans, the amount of the periodic payment and the amount of any ballon payment
For variable rate loans, statement that increase may increase, the amount of the single maximum payment
Creditors may not refinance any high cost mortgage within one year of having made the loan into another
Higher cost loan
A creditor may not extend a high cost mortgage unless the creditor obtains a __________ from the consumer indicating the consumer has obtained credit counseling fromHUD certified counselor
Certificate
Higher prices mortgage loans include
Closed end consumer transactions secur d by the consumer principal dwelling with an APR that exceeds the average prime offer rate
A loan originator may not direct or steer a consumer to s transaction based on the fact
That the loan originator will receive greater compensation from the lender
What is a covered transaction
A transaction with an APR that exceeds the average prime offer rate for a comparable transaction
Qualified mortgage is a consumer loan secured by a dwelling that
Provides for regular periodic payments that are substantially equal
Does not have a term that exceeds 30 years
Had points and fees that do not exceed regulation limitations
Loan underwritten taking into account a payment using the maximum interest rate that may apply the first five years
Income was verified
dti does not exceed 43 %
Safe harbor loan is
Is not a higher priced loan secured by a dwelling, complies with the repayment ability requirements
A presumption of compliance loan is a higher price loan that
Presumed to comply with the repayment requirments. The creditor did not make a reasonable good faith determination of ability to repay
A loan cannot be qualified mortgage unless
The points and fees don’t exceed a certain % of loan amount
Can be purchased by the govt
Can be insured by HUD
Can be gursnttee by the va
Have ballon payment does not exceed 30 years
Subtanually equal payments over 30 years
Interest rate does not increase
Consumer may not have prepayment penalties unless
The penalty is permitted by law
The APR cannot increase after consummation
The loan is not a higher priced mortgage
The loan is a qualified mortgage
A prepayment Penalty may not apply after the three year period
Following consummation
