TILA (Regulation Z) Flashcards by Melissa Yadira

What does TILA stand for? What is it also known as?

The Truth in Lending Act (Regulation Z)

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What Act is TILA a part of?

The Consumer Credit Protection Act

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What is TILA intended to do?

TILA was intended to “assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit

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What is a business day when it comes to deadlines and disclosures?

Generally, a business day is any day on which a company is open for business. However, in several circumstances, a business day is considered to be any day except Sundays and legal public holidays.

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What is a dwelling?

A dwelling 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.

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What is a finance charge?

Finance charges are the costs of obtaining credit paid by the consumer, expressed as a dollar amount.

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What is a prepaid finance charge?

Prepaid finance charges are charges which are paid separately before or at the time of consummation or which are withheld from the proceeds of the loan.

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True or False: TILA specifically applies to credit extended for personal, family, or household purposes and does not apply to any loan for business, commercial, or agricultural purposes

True

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If an advertisement contains an interest rate, what must it also include?

It must also include the annual percentage rate (APR), using that term. If the APR can increase over the term of the loan, that fact must also be disclosed.

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What trigger terms on an advertisement for closed-end loans require additional disclosure?

The amount or percentage of any down payment
The number of payments or period of repayment
The amount of any payment
The amount of any finance charge

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What trigger terms on an advertisement for open-end loans require additional disclosure?

The finance charge
Other charges, such as late payment, title, appraisal, and credit report fees
Taxes imposed on the credit transaction
Payment terms of the home equity plan

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What must an ad also state if a trigger term is included in an ad for a closed-end loan?

The amount or percentage of the down payment
The terms of repayment, and
The APR and, if the APR may change during the term of the loan, that fact

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What is an APR?

The APR is the relationship of the total finance charge to the total amount financed, a measure of the cost of credit, expressed as a yearly rate (12 C.F.R. §1026.22). Its calculation factors in some of the costs associated with the loan, including broker fees and mortgage insurance. As such, it may be used as a shopping tool, allowing consumers to compare rates and fees with one disclosure.

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What prepaid finance charges are included in the calculation of the APR?

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 upfront mortgage insurance premium (UFMIP), if an FHA loan
Buy-down fees
Flood certification fees
Closing fees
Courier fees

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What fees are not included in the calculation of the APR?

Title insurance fees
Funds being escrowed for taxes and insurance
Notary fees
Appraisal fees
Termite inspection fees
Credit report charges

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What is the TILA-RESPA Integrated Disclosure Rule?

If any terms stated in the required disclosures change during the transaction and the change exceeds an applicable tolerance level, the information must be re-disclosed

So long as the amount set forth in the Loan Estimate was based on the “best information reasonably available,” a creditor may charge a consumer more than the amount disclosed without regard to tolerance limitations for what items?

Prepaid interest
Property insurance premiums
Property taxes and other charges paid to third-party providers for services that are not required by the creditor
Amounts placed in escrow to cover property insurance premiums and/or taxes
Services required by the creditor for which the consumer may shop and which are not on the creditor’s written list of providers

The total of all charges for third-party services, as well as recording fees, charged to a consumer may not exceed by more than ___% the total amount for such charges disclosed on the Loan Estimate.

10%

What items have a zero tolerance and cannot change from what is on the loan estimate?

Transfer taxes
Fees paid to an unaffiliated third-party service provider in connection with a service for which the consumer was not permitted to shop
Fees paid to a licensee when the amount is an estimate NOT based on the “best information reasonably available”

What does HOEPA stand for?

Home Ownership and Equity Protection Act (HOEPA)

What is a high-cost home loan in regards to APR?

A loan is a high-cost home loan if the loan’s APR exceeds the average prime offer rate (APOR) for a comparable transaction by more than:

5 percentage points for a first-lien loan
5 percentage points for a first-lien loan of less than $50,000 and secured by a dwelling that is personal property (e.g., a manufactured home), or
5 percentage points for a subordinate lien

What is a high-cost home loan in regards to points?

A loan is also a high-cost home loan if the transaction’s points and fees will exceed:

For a loan amount of $22,052 or more: 5% of the total loan amount, or
For a loan amount of less than $22,052: the lesser of 8% or $1,103

What is a high-cost home loan in regards to prepayment penalty?

A loan may also be a high-cost home loan if it provides for a prepayment penalty more than 36 months after consummation or a prepayment penalty that exceeds, in total, more than 2% of the amount prepaid.

What discolsures must borrowers receive prior to closing on a high cost home loan? When should they receive it?

The APR
The following statement:
You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan.

The amounts of the regular monthly payment and any balloon payment
If a variable-rate transaction, a statement that the interest rate and payment amount may increase
For a closed-end loan, the total amount being borrowed and whether that amount includes finance charges allowed in the calculation of points and fees

What terms may not be included in a high-cost home loan?

Balloon payments, with specific, limited exceptions for seasonal or irregular income A payment schedule that: Will result in negative amortization, or Consolidates more than two periodic payments and pays them in advance from the proceeds An increase in the interest rate after default Prepayment penalties (Prepayment penalties are always prohibited for high-cost home loans)

A creditor may not make a high-cost home loan unless it receives what?

A written certification that the borrower has obtained counseling on the advisability of the mortgage loan from a HUD-approved counselor

Up to when do borrowers have a right to rescind a transaction?

Borrowers have the right to rescind a transaction in which a security interest is given on their primary residence until the later of midnight on the third business day following the consummation of the transaction or delivery of the required disclosures and rescission forms

The right to rescind does not apply to what transactions?

A residential mortgage loan used for a purchase transaction A refinancing by the same creditor of an extension of credit already secured by the borrower’s primary dwelling The right of rescission may apply to any new credit granted over and above the unpaid principal balance of the loan being refinanced A transaction in which a state agency is the creditor

If the borrower decides to rescind, he or she may provide written notification in what ways? When is notice considered given?

They may provide written notification by mail, telegram, or any other means of written communication; notice is considered given when the transmission is mailed or sent by the borrower.

What is a business day when it comes to recission?

Business day for rescission purposes means any day but Sunday or public holidays

If a creditor/lender fails to provide the required disclosures and notice to effectively initiate the three-day period, the borrower’s right to rescind automatically expires at the earliest of what occurrences?

Three years from consummation of the transaction Transfer of the borrower’s interest in property, or Sale of the borrower’s interest in property

If foreclosure proceedings have been commenced and the three years have not lapsed, the borrower can rescind the transaction if:

Mortgage broker fees that should have been included in the finance charge were not, or The rescission notice was not formatted or completed as required under Regulation Z

If a borrower rescinds a transaction, within _____ days of the rescission, he or she is entitled to a refund of all money or property given to the creditor.

What is a higher-priced mortgage loan (HPML)?

A higher-priced mortgage loan (HPML) is a closed-end consumer credit transaction secured by the borrower’s principal dwelling that has an APR that exceeds the APOR by: If a first-lien loan eligible for purchase by Freddie Mac (i.e., not exceeding the conforming loan limit), 1.5 percentage points If a first-lien jumbo loan, 2.5 percentage points If a subordinate-lien loan, 3.5 percentage points

What is a qualified mortgage?

A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that you’ll be able to afford your loan.

What is the ability to repay rule?

The ability to repay rule is the part of the Dodd-Frank Act that restricts loans to borrowers who are likely to have difficulty repaying them. Factors considered in the ability to repay include the borrower's income, assets, employment status, liabilities, credit history, and the debt-to-income (DTI) ratio.

True or False: If a higher-priced mortgage loan (HPML) is determined to be a QM, it is not automatically considered to be in compliance with the ATR Rule.

True

What are the requirements when making an HPML?

In general, an escrow account for the payment of property taxes and mortgage-related insurance (e.g., hazard insurance, credit-related insurance) must be established A creditor must obtain a written appraisal of the property, performed by a licensed or certified appraiser A creditor must obtain two written appraisals if: The seller acquired the property 90 or fewer days prior to the date of the sale contract and the sale price is 10% (or more) higher than the seller’s acquisition price, or The seller acquired the property 91 to 180 days prior to the date of the sale contract and the sale price is 20% (or more) higher than the seller’s acquisition price