TILA (Truth In Lending Act) - Regulation Z Flashcards
The Truth in Lending Act was passed by Congress in what year?
1968
TILA is administered by who?
the Consumer Financial Protection Bureau (CFPB)
TILA was enacted to protect WHO during credit transactions?
consumers
TILA deals with “C/A/A” of consumer loans. What is being referenced?
Credit
APR
Advertising
Regulation Z applies to what kind of motgages?
residential mortgages (1-4 units)
Regulation Z does not include what time of loans?
commercial loans or other nonresidential loans
TILA applies to credit transactions payable in more than _______ installments.
more than four installments
TILA disclosures include what? Hint: There are 7.
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
There are three general area covered by Regulation Z. What are they?
Disclosure of financial charges
distribution of the CHARM booklet
The right of rescission
When is the CHARM booklet required to be provided to the borrower?
When he/she receives an adjustable rate mortgage.
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?
HELOC (Home Equity Line of Credit)
Home Equity Line of Credit Loan
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?
within 30 days of acquisition
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?
The name, address and telephone number of the new owner of the mortgage.
The Transfer of Ownership Disclosure only applies to what type of mortagage?
Primary mortgage
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?
Transfer of Ownership Disclosure and Transfer of Servicing Disclosure
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?
at least 60 days notice
The Loan Estimate is what type of disclosures?
a TILA disclosure
According to TILA, the Loan Estimate (LE) should disclose what information?
Settlement Service Provider Costs
Initial APR of the loan
Estimated cash to close
Other loan features
The Closing Disclosure (CD) is what type of disclosure?
TILA disclosure
When is the Closing Disclosure required to be provided to the borrower/
3 days prior to loan settlement (doc signing)
Final copy at loan settlement (doc signing)
What does the Closing Disclosure (CD) provide to the borrower?
The actual closing cost of the loan.
The Closing Disclosure (CD) combines two disclosures. What are they?
the HUD 1 Settlement Statement
the Final Truth in Lending disclosures
The HUD 1 Settlement Statement and the Final Truth in Lending disclosures were combined to make what commonly known disclosure?
The Closing Disclosure (CD)
This reflects certain finance charges associated with the loan, spread out over the life of the loan. What am I referring to?
the APR
APR disclosure must occur within how many business days of receiving a signed loan application?
within 3 business days
What is another word for APR?
Effective Rate
Effective Rate is another term used for what?
APR
What are other words used for Interest Rate?
Note Rate or Nominal Rate
Note Rate or Nominal Rate are other words used for?
Interest Rate
TIP stands for Total Interest Percentage. This expresses the total interest being charged on the loan expressed as what?
expressed as a percentage
The APR is the total interest plus all fees expressed as what?
expressed a percentage
TILA requires that the APR must be disclosed, even when the consumer simply calls for an interest rate quote. Is this statement true?
Yes it is true. (*Whether orally, or in writing the MLO is obligated to disclose.)
What does MDIA stand for?
Mortgage Disclosure Improvement Act
According to TILA what is the soonest a loan can close?
7 business days after the disclosures have been delivered
Re-disclosures are triggered on regular transactions (30 year fixed) if the APR varies by what?
1/8% or 0.125%
Re-disclosures are triggered on irregular transactions (anything other than 30 year fixed) if the APR varies by what?
1/4% or 0.25%
TILA deals with “advertising” of what kind of loans?
consumer loans
What are the three triggering terms under TILA?
Down Payment
Monthly Payment
Interest Rate
If an advertisement contains the APR, are any additional disclosures needed?
No, because APR is not a trigger word. No other disclosure is needed.
What are three examples of non-triggering terms?
6% APR
Easy Monthly Payments
Terms to fit your budget
(Why? - Because these are generic terms)
What law established the Right of Rescission rule?
TILA
According to TILA, there is no right of rescission on what types of transactions?
Purchase
2nd home
Investment property
According to TILA, each much must receive how many copies of the notice/right to rescind?
two copies
If a borrower was not properly notified of their right to rescind, the rescission period could extend for up to how long?
three years
When does the rescission period end?
At midnight of the 3rd day
If money was collected and a borrower rescinds, escrow has how many days to return any money collected to the borrower?
20 days
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.
at least 7 business days prior
What fee would the borrower NOT have to pay if it were a cash deal?
The buyer would not have to pay finance charges since there is no money being lent.
Finance charges are the costs of obtaining credit paid by the consumer, expressed as what?
a dollar amount
HOPEA (Home Ownership and Equity Protection Act) of 1994 amended TILA and established requirements for certain loans with high _____ and high ______.
high rates and high fees
What does APOR stand for?
Average Prime Offer Rate
What is used to determine if a loan is a Section 32 (High Cost) or Section 35 (High Priced) loan?
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)
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.
more than 6.5%
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.
A High Cost (Section 32)
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?
jumbo = 2.5% subordinate = 3.5%
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.
High Priced (Section 35)
What is another term for Section 35 Loans (High Priced Loans)?
HPML (High Priced Mortgage Loans)
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?
Section 35 (High Priced Loans)
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?
High-Cost (Section 32)
Prepayment penalties are strictly prohibited in what kind of loan?
High-Cost loans (Section 32)
For High Priced loans (Section 35), lenders must required a escrow account to be maintained for a minimum of how long?
5 years minimum
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?
It can be cancelled after five years if the LTV is 80% or less and the borrower is current on the mortgage payments.
What does the Loan Originator Compensation rule prohibit?
It prohibits dual compensation
What is dual compensation?
It means the LO is restricted to getting paid by either the borrower OR the lender, but not both.
What does YSP stand for?
Yield-Spread Premium
What is YSP?
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
What are the penalties for violating TILA?
$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
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
For violation of TILA
Prepaid finance charges are used to calculate the APR. What charges ARE included?
*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)
Some fees are NOT included in the prepaid finance charges used to calculate the APR. What charges ARE NOT included?
Title Insurance Escrow for taxes and insurance Notary fees Appraisal fees Termite inspection fees Credit report charges (Remember - "TENACT")
