Unit 8: Consumer Protection Laws

Question 1

What are the 2 consumer protection laws?

Answer 1

1. Truth in Lending Act (TILA)

2. Real Estate Settlement Procedures Act (RESPA)

Question 2

What does TILA cover?

Answer 2

All consumer lending, not just real estate.

Question 3

What does RESPA cover?

Answer 3

All closing costs association with real estate professionals, including lenders and title companies.

Question 4

Who enforces the consumer protection laws?

Answer 4

The Consumer Financial Protection Bureau

Question 5

What is another name for TILA?

Answer 5

Regulation Z

Question 6

What does RESPA standardize?

Answer 6

The closing practices for 1- to 4-family residential properties financed by federally related loans.

Question 7

What does RESPA require at the application for the loan and at the closing of the loan?

Answer 7

A loan cost disclosure at application and a loan closing disclosure at closing.

Question 8

What are the 2 things restricted by RESPA?

Answer 8

1. Excessive escrow account deposits (taxes & insurance)

2. Kickbacks

Question 9

How many months of additional fees can an escrow account have?

Answer 9

No more than 2 months of additional fees plus what is owed.

Question 10

What is the purpose of TILA?

Answer 10

To promote the informed use of consumer credit by requiring advance disclosures of loan terms and costs.

Tell the whole truth!

Question 11

According to TILA, what are the 4 primary disclosures required of lenders?

Answer 11

1. True cost of obtaining credit
2. Total finance charges associated with loan
3. Total number and amount of all payments
4. Total amount financed

Question 12

How is the true cost of obtaining credit expressed?

Answer 12

As the loan’s APR, the relationship of the total finance charge to amount financed.

Question 13

T/F A loan’s APR is the same as the interest rate.

Answer 13

False. APR and interest rate are not the same thing.

Question 14

Why will the APR be higher than the “face rate” or “nominal interest rate”?

Answer 14

Because they factored in all costs with acquiring the loan.

Question 15

What kinds of real estate loans do not require TILA disclosures?

Answer 15

• Loans to corporations
• Business or commercial loans
• Seller financing loans

Question 16

What does the right of rescission under TILA allow the borrower to do?

Answer 16

It allows the borrower to cancel within 3 days of closing.

Question 17

T/F Rescission does not apply to home purchase or construction loans.

Answer 17

True

Question 18

Under TILA, what would trigger a full disclosure requirement in an advertisement?

Answer 18

Down payment, interest rate, monthly payments, and number of payments.

Question 19

What are the 2 specific finance terms allowed in an advertisement under TILA?

Answer 19

1. Asking price

2. APR

Question 20

T/F General statements like “low down payment” or the amount of property taxes and HOA dues, are allowed in an advertisement.

Answer 20

True

Question 21

Under TRID (the merging of TILA and RESPA), what are the 2 disclosures that are now required for lenders to provide?

Answer 21

1. Loan Estimate

2. Closing Disclosure

Question 22

What does the loan estimate show the borrower?

Answer 22

Both the APR/lender costs and all estimated loan costs

Question 23

When must the lender provide the borrower the loan estimate disclosure?

Answer 23

No later than 3 business days after the loan application.

Question 24

When must the lender provide the borrower the closing disclosure?

Answer 24

No later than 3 business days before the closing.

Question 25

If changes are made to the loan, how many days does the borrower get to review?

Answer 25

3 business days

Question 26

What are the changes to a loan that require an additional 3 business day review?

Answer 26

If the APR increases more than

• 1/8% for fixed rate loan
• 1/4% on variable rate loan