TILA (Truth In Lending Act) - Regulation Z

Question 1

The Truth in Lending Act was passed by Congress in what year?

Answer 1

1968

Question 2

TILA is administered by who?

Answer 2

the Consumer Financial Protection Bureau (CFPB)

Question 3

TILA was enacted to protect WHO during credit transactions?

Answer 3

consumers

Question 4

TILA deals with “C/A/A” of consumer loans. What is being referenced?

Answer 4

Credit
APR
Advertising

Question 5

Regulation Z applies to what kind of motgages?

Answer 5

residential mortgages (1-4 units)

Question 6

Regulation Z does not include what time of loans?

Answer 6

commercial loans or other nonresidential loans

Question 7

TILA applies to credit transactions payable in more than _______ installments.

Answer 7

more than four installments

Question 8

TILA disclosures include what? Hint: There are 7.

Answer 8

LE (Loan Estimate
CD (Closing Disclosure)
CHARM Booklet (Consumer Handbook on Adjustable Rate Mortgages)
the When Your Home is on the Line Booklet
ARM Disclosures
Notice of the Right to Rescind Disclosures
Balloon Payment Disclosures

Question 9

There are three general area covered by Regulation Z. What are they?

Answer 9

Disclosure of financial charges
distribution of the CHARM booklet
The right of rescission

Question 10

When is the CHARM booklet required to be provided to the borrower?

Answer 10

When he/she receives an adjustable rate mortgage.

Question 11

The “When Your Home is on the Line” disclosure is required to be provided to the borrower if he/she receives either of these types of loans. What two loans require this disclosure?

Answer 11

HELOC (Home Equity Line of Credit)

Home Equity Line of Credit Loan

Question 12

The Transfer of Ownership Disclosure requires that entities that purchase or acquire mortgage loans notify the borrower and provide the name, address and telephone number of the new owner of the mortgage within how many days?

Answer 12

within 30 days of acquisition

Question 13

The Transfer of Ownership Disclosure requires that entities that purchase or acquire mortgage loans notify the borrower and provide what three pieces of information to the borrower within 30 days of the acquisition?

Answer 13

The name, address and telephone number of the new owner of the mortgage.

Question 14

The Transfer of Ownership Disclosure only applies to what type of mortagage?

Answer 14

Primary mortgage

Question 15

The owner of the loan and the servicer of the loan are most often separate entities. What two disclosures often get confused in regards to ownership and servicing of a loan?

Answer 15

Transfer of Ownership Disclosure and Transfer of Servicing Disclosure

Question 16

Some disclosures under TILA are specific to ARMs (adjustable rate mortgages). Borrower who have an ARM must be provided how many days notices BEFORE and interest rate changes occurs if that change will result in a new payment?

Answer 16

at least 60 days notice

Question 17

The Loan Estimate is what type of disclosures?

Answer 17

a TILA disclosure

Question 18

According to TILA, the Loan Estimate (LE) should disclose what information?

Answer 18

Settlement Service Provider Costs
Initial APR of the loan
Estimated cash to close
Other loan features

Question 19

The Closing Disclosure (CD) is what type of disclosure?

Answer 19

TILA disclosure

Question 20

When is the Closing Disclosure required to be provided to the borrower/

Answer 20

3 days prior to loan settlement (doc signing)

Final copy at loan settlement (doc signing)

Question 21

What does the Closing Disclosure (CD) provide to the borrower?

Answer 21

The actual closing cost of the loan.

Question 22

The Closing Disclosure (CD) combines two disclosures. What are they?

Answer 22

the HUD 1 Settlement Statement

the Final Truth in Lending disclosures

Question 23

The HUD 1 Settlement Statement and the Final Truth in Lending disclosures were combined to make what commonly known disclosure?

Answer 23

The Closing Disclosure (CD)

Question 24

This reflects certain finance charges associated with the loan, spread out over the life of the loan. What am I referring to?

Answer 24

the APR

Question 25

APR disclosure must occur within how many business days of receiving a signed loan application?

Answer 25

within 3 business days

Question 26

What is another word for APR?

Answer 26

Effective Rate

Question 27

Effective Rate is another term used for what?

Answer 27

APR

Question 28

What are other words used for Interest Rate?

Answer 28

Note Rate or Nominal Rate

Question 29

Note Rate or Nominal Rate are other words used for?

Answer 29

Interest Rate

Question 30

TIP stands for Total Interest Percentage. This expresses the total interest being charged on the loan expressed as what?

Answer 30

expressed as a percentage

Question 31

The APR is the total interest plus all fees expressed as what?

Answer 31

expressed a percentage

Question 32

TILA requires that the APR must be disclosed, even when the consumer simply calls for an interest rate quote. Is this statement true?

Answer 32

Yes it is true. (*Whether orally, or in writing the MLO is obligated to disclose.)

Question 33

What does MDIA stand for?

Answer 33

Mortgage Disclosure Improvement Act

Question 34

According to TILA what is the soonest a loan can close?

Answer 34

7 business days after the disclosures have been delivered

Question 35

Re-disclosures are triggered on regular transactions (30 year fixed) if the APR varies by what?

Answer 35

1/8% or 0.125%

Question 36

Re-disclosures are triggered on irregular transactions (anything other than 30 year fixed) if the APR varies by what?

Answer 36

1/4% or 0.25%

Question 37

TILA deals with "advertising" of what kind of loans?

Answer 37

consumer loans

Question 38

What are the three triggering terms under TILA?

Answer 38

Down Payment Monthly Payment Interest Rate

Question 39

If an advertisement contains the APR, are any additional disclosures needed?

Answer 39

No, because APR is not a trigger word. No other disclosure is needed.

Question 40

What are three examples of non-triggering terms?

Answer 40

6% APR Easy Monthly Payments Terms to fit your budget (Why? - Because these are generic terms)

Question 41

What law established the Right of Rescission rule?

Answer 41

TILA

Question 42

According to TILA, there is no right of rescission on what types of transactions?

Answer 42

Purchase 2nd home Investment property

Question 43

According to TILA, each much must receive how many copies of the notice/right to rescind?

Answer 43

two copies

Question 44

If a borrower was not properly notified of their right to rescind, the rescission period could extend for up to how long?

Answer 44

three years

Question 45

When does the rescission period end?

Answer 45

At midnight of the 3rd day

Question 46

If money was collected and a borrower rescinds, escrow has how many days to return any money collected to the borrower?

Answer 46

20 days

Question 47

The Truth in Lending Disclosure must be delivered at least how many business days prior to funding for reverse mortgages, equity lines of credit, mortgages secured by a mobile home that are not attached to land.

Answer 47

at least 7 business days prior

Question 48

What fee would the borrower NOT have to pay if it were a cash deal?

Answer 48

The buyer would not have to pay finance charges since there is no money being lent.

Question 49

Finance charges are the costs of obtaining credit paid by the consumer, expressed as what?

Answer 49

a dollar amount

Question 50

HOPEA (Home Ownership and Equity Protection Act) of 1994 amended TILA and established requirements for certain loans with high _____ and high ______.

Answer 50

high rates and high fees

Question 51

What does APOR stand for?

Answer 51

Average Prime Offer Rate

Question 52

What is used to determine if a loan is a Section 32 (High Cost) or Section 35 (High Priced) loan?

Answer 52

The Average Prime Offer Rate or APOR *(The loan's APR is compared to the APOR to see if it triggers it to be a Section 32 or a Section 35)

Question 53

A loan will be considered a High Cost (Section 32) loan if its APR exceeds the APOR by more than _____% for a first lien of $50,000 or higher, 8.5%% on first lien less than $50,000 and or 8.5% for a subordination lien.

Answer 53

more than 6.5%

Question 54

A loan will be considered a _________________ loan if its APR exceeds the APOR by more than 6.5% for a first lien of $50,000 or higher, 8.5%% on first lien less than $50,000 and or 8.5% for a subordination lien.

Answer 54

A High Cost (Section 32)

Question 55

A loan will be considered a High Priced (Section 35) loan if its APR exceeds the APOR by more than 1.5%, what about for jumbo first lien loans and subordinate liens?

Answer 55

``` jumbo = 2.5% subordinate = 3.5% ```

Question 56

A loan will be considered a ____________ loan if its APR exceeds the APOR by more than 1.5%, 2.5% for jumbo first lien loans and 3.5% subordinate liens.

Answer 56

High Priced (Section 35)

Question 57

What is another term for Section 35 Loans (High Priced Loans)?

Answer 57

HPML (High Priced Mortgage Loans)

Question 58

What type of loan requires the following: impound account for the first five years, no prepayment penalty (unless it is limited to the first two years of the loan) and the lender must verify the borrower's ability to repay the loan?

Answer 58

Section 35 (High Priced Loans)

Question 59

These types of home loans have the following restrictions: most balloon mortgages are prohibited, the borrowers must prove an ability to repay the loan, and the borrower must speak to a HUD-approved housing counselor?

Answer 59

High-Cost (Section 32)

Question 60

Prepayment penalties are strictly prohibited in what kind of loan?

Answer 60

High-Cost loans (Section 32)

Question 61

For High Priced loans (Section 35), lenders must required a escrow account to be maintained for a minimum of how long?

Answer 61

5 years minimum

Question 62

For High Priced loans (Section 35), lenders must required a escrow account to be maintained for a minimum of 5 years. When can the escrow account be canceled?

Answer 62

It can be cancelled after five years if the LTV is 80% or less and the borrower is current on the mortgage payments.

Question 63

What does the Loan Originator Compensation rule prohibit?

Answer 63

It prohibits dual compensation

Question 64

What is dual compensation?

Answer 64

It means the LO is restricted to getting paid by either the borrower OR the lender, but not both.

Question 65

What does YSP stand for?

Answer 65

Yield-Spread Premium

Question 66

What is YSP?

Answer 66

Compensation or rebate paid to a mortgage broker for giving a borrower a higher interest rate on a loan in exchange for lower up front costs, generally paid in origination fees, broker fees or discount points

Question 67

What are the penalties for violating TILA?

Answer 67

$5,000 per day for a single violation $25,000 per day for reckless violations $1,000,000 per day for knowingly violating TRID rules

Question 68

The following penalties apply when WHAT is violated? $5,000 per day for a single violation $25,000 per day for reckless violations $1,000,000 per day for knowingly violating TRID rules

Answer 68

For violation of TILA

Question 69

Prepaid finance charges are used to calculate the APR. What charges ARE included?

Answer 69

*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 UFMIP, *Buydown, *Flood certification fees, *Closing fees and Courier fees (Lender)

Question 70

Some fees are NOT included in the prepaid finance charges used to calculate the APR. What charges ARE NOT included?

Answer 70

``` Title Insurance Escrow for taxes and insurance Notary fees Appraisal fees Termite inspection fees Credit report charges (Remember - "TENACT") ```