Chapter 14: ECOATILARESPA in Practice Flashcards

Chapter 14: ECOA/TILA/RESPA in Practice Flashcards

As a real estate agent, mentioning a triggering term while advertising a property for sale also subjects the agent to the Truth in Lending Act, same as a lender.Making bait and switch advertising or misleading advertising is unlawful.Truth in Lending Act affects advertising rules. If an advertisement for credit for real estate mortgages contains trigger terms, then the three specific following disclosures

must also be included in the advertisement:

• The amount or percentage of the down payment; 2. The

terms of repayment; and 3. The APR using that term spelled out in full. If the annual percentage rate may be increased after consummation of credit transaction, that fact must also be disclosed.The Real Estate Settlement Procedures Act applies to most any closing involving a standard home mortgage loan from a financial institution or mortgage banker.Federally related mortgage loans for the purchase of 1 to 4 family structure, including construction loans; manufactured homes using proceeds of a loan; loans made by a lender, creditor, or dealer; made by or insured by an agency of the federal government; made relating to a federal housing program; made by and intended to be sold by a lender to a federal organization; subject of a home equity conversion mortgage; made by a lender, dealer, or creditor to be used to fund an installment sales contract; and contract or contract for deed.The Truth in Lending Act requires that the full credit costs must be disclosed in the form of the AnnualPercentage Rate.APR is the interest rate, origination fees, discount points, and other loan costs. The APR represents the Annual Cost of Credit.Under the Real Estate Settlement Procedures Act, a financial institution or mortgage broker is required to provide a borrower with a copy of the special consumer information booklet at the time a written application is submitted or no later than 3-business days after application is received.The Truth in Lending and Real Estate Settlement Procedures Integrated Disclosure also requires that no later than the third business day after the submission of a loan application, the borrower is provided with a Loan Estimate which discloses key features, costs, and risks of the mortgage loan for which the person has applied.A potential borrower must be informed within 30 days of whether the person has been denied or granted credit.This notice may be provided verbally, but for record keeping purposes, should be provided in writing and provide the specific reasons for the denial.A Closing Disclosure form must be provided to the borrower 3-business days before the loan closing, and is designed in the same format as the Loan Estimate for easy comparison.A Closing Disclosure details all the costs associated with the closing including lender fees, real estate agent commissions, title closing fees, APR, and prorated items between the buyer and the seller.Title I of the Consumer Credit Protection Act, also called the Truth in Lending Act was passed in 1968 and promotes the informed use of consumer credit by requiring disclosures from lenders about loan terms and costs of the loan.The Federal Reserve Regulation Z requires a uniform standard disclosure of loan costs and charges so that the consumer is informed on the true costs of a loan and given the opportunity to fairly shop loans by comparing one to the other.Trigger Terms include the amount of the down payment, expressed either as a percentage or as a dollar amount,

the amount of any payment expressed either as a percentage or as a dollar amount, and the period of repayment or total time required to repay.Examples of Triggering Terms include 25% down, 90% financing, Monthly payments less than $850, 36 small

payments are all you make, 4-year loans available, Less than $100 interest.Vague phrases that simply talk up the loan terms without specifics are not considered trigger terms.These examples are not trigger terms and do not require a

disclosure: no down payment, easy monthly payments, pay

weekly, terms to fit your budget, 5% below our standard rate.When determining income to qualify for a mortgage, lenders may consider public assistance as income and treat it as any other type of income.Social security, pensions, annuities, alimony, child support, and maintenance payments also are considered income.Part-time income is also to be considered. However, picking up a second part time job may not count toward qualifying income to debt ratios.Equal Credit Opportunity Act, Truth inLending Act, and Real Estate Settlement Procedures Act These acts are in place to protect theconsumer.The Equal Credit Opportunity Act protect consumers who apply for mortgage loans and prohibits discrimination in loan under writing based on sex, marital status, race, religion, age, or national origin.The Consumer Financial Protection Bureau, known as Regulation B, provide substantive and procedural framework for fair lending.Violations of the Equal Credit Opportunity Act should be reported to the Consumer Financial Protection Bureau.Lenders who fail to follow the Equal Credit Opportunity Act can face civil liability for actual and punitive damages of up to $10,000. If it is a class action lawsuit, it could be as much as the lesser of $500,000 or 1% of the creditor's net worth.Equal Credit Opportunity Act prohibits discriminatory treatment of income from alimony, child support, public assistance, or part-time employment.Equal Credit Opportunity Act also prohibits inquiry about, or consideration of, childbearing plans or potential for childbearing.In 2010, Congress passed the Dodd-Frank Act, which combined regulations under the Truth-in-Savings Act, Funds Availability Act, Equal Credit Opportunity Act, and the Truth-in-Lending Act. In 2011, administration and enforcement of the Real Estate Settlement Procedures Act was transferred from HUD to the Consumer Financial Protection Bureau.Called TILA-RESPA Integrated Disclosure Rule, it consolidated consumer protectionagencies under Consumer Financial Protection Bureau to simplify oversight and compliance. It consolidated the four previously required disclosures down to only two disclosures.The Truth in Lending Act requires disclosure of full credit costs of four areas to include the finance charge, total amount financed, total amount of payments, and annual percentage rate, also called APR.The Truth in Lending Act also requires lenders to disclose interest, discount points, servicing fees, and origination fees, but not title, legal, survey, appraisal, credit report, or deed preparation.The Real Estate Settlement Procedures Act was passed by Congress in 1974 which prohibits kick-backs, also called Fee-Splitting or Unearned Fees, to a lender from vendors of closing related services. Paying an unlicensed person a kickback, or referral fee, is illegal.A kickback is something of value given in exchange for referring a settlement service business to another person.Kickbacks are said to harm consumers by driving up the cost of transaction. Mortgage brokers can only pay other mortgage brokers a referral fee. Real Estate Licensees can only pay other real estate licensees a referral fee, and title companies may not pay a referral fee or give something of value in return forreferring the business.

In some credit transactions in which a security interest is or will be retained or acquired in a consumer's principal dwelling, the Truth in Lending also requires that a disclosure be made to consumers of credit regarding a 3-day right of rescission. This means that the buyer can cancel the transaction within 3 days.This 3-day right of rescission applies to home equity lines of credit, second mortgages and refinanced loans, but does not apply to new loans on a home the borrower did not previously own before securing the mortgage. It also does NOT apply to construction loans.