Give 3 examples of trigger terms

TILA Truth in Lending Reg Z Flashcards Federal ReservePURPOSE OF TILA It will most likely trigger the requirement to disclose the APR Give 3 examples of trigger terms $5,000 and be imprisoned for 1 year or both Reg Z does not apply to Per TILA if the rate is present in the advertisementThe APR must be disclosed According to TILA/REG Z - what is the definition of a Business day?According to TILA the term refinance applies to?TILA's Main PurposeProtect consumers from predatory lending practices TILA RegZ TILA requires 2right to rescind copies in the loan closing packet TILA disclosuresHOEPA notice, home ownership counseling notice, TRID

• No Payment Down2. FHA Loans Available3. Attractive

financing available4. No Closing Costs When any of the trigger terms are included in the following advertisement, the ad must include the following information.

• 1st Mortgages used for purchases2. Refinancing of an

existing 1st mortgage by the same lender TILA Covers QM provides liability protection for creditors Creates a presumption that the creditor complied with the ATR Rule 4

types of QM loans:o Generalo Temporaryo Small Creditoro

BalloonPayment QMs General QM Loan Requirements:o

No neg amo No interest onlyo No balloon paymentso Cannot exceed 30 year termso May not have points and

fees that exceed: 3% of the total loan amount for a loan

greater than or equal to $100,000 5% of the total loan amount for a loan = or less than $100,000 $1,000 for a loan less than or equal to $12,500 but less than $20,000 8% of the total loan amount for a loan less than $12,500o Underwrite based on fullyamortizing schedule using MAX rate permitted during the first 5 years o Determine ATRo Consumer's total debt to income cannot exceed 43% Ability to Repay (ATR) (Under TILA) 25 timesReg Z applies to any individual or business that offers or extends credit if the following four conditions are met?(The Switch) When the consumer calls the advertiser, the consumer learns that the advertised program no longer exists,or the consumer does not qualify for the loan, but the advertiser then goes on to present some other loan program with less attractive terms.It would be considered misleading to quote only the nominal interest rate of interest stated in the promissory note if the annual percentage rate is significantly higher.To prevent misleading advertisements, TILA states that ATR RequirementsThis law ensures that consumers receive good faith estimates of Truth in Lending Act (TILA) disclosures and to provide sufficient time for consumers to review the disclosures before closing.

is a phrase that represents the attractive feature of the credit plan associated with the advertisement Under Reg Z you can be fined how much for inaccurate disclosure information?

• When credit is offered or extended to consumers2.

Offering or extension of credit is done regularly3. Credit is subject to a finance charge or is payable by a written agreement in more than 4 installments4. Credit is primarily for personal, family, or household purposes TILA Truth in Lending Reg Z was implemented by?A creditor is required to keep all records of compliance with Reg Z for how long?

• years

Promotes informed use of credit (disclosure of the APR) Provides right of rescission (3 days after close on owner occupied refinance transactions) Advertising = requires disclosure of certain terms when ads include trigger termso

Trigger terms: down payment, term, payment, any finance

charge = the disclosure of the APR 3/7/3 Rule - earliest close 7 days after initial disclosure; 3 businessday waiting period before consummation if re disclosure required Penalties -o Violate Rescission rights = borrower can rescind the loan for 3 yearso HOEPA = liable to borrower for all finance charges, can't sell on the secondary marketo Civil Liability, Class Action Suitso FINES!TILA 3 and 5 year record retention requirements TILA is enforced by?Dodd-Frank

• Loans for businesses2. Commerical3. AgriculturalReg Z applies to any individual or business that offers or

extends credit of the following 4 conditions are met:

If you meet either of the two options under QM that showed you proved Ability to Repay requirement, you are protected from a lawsuit What factors should be used to determine if a borrower has the Ability to Repay?10% down$1000 down80% financingMDIA Mortgage Disclosure Improvement Act an amendment to TILA Mortgage Disclosure Improvement Act (MDIA) TILA has many regulations regarding Advertising.Many of these advertising regulations are designed to prevent "Bait and Switch" advertising which occurs when a lender or mortgage company advertises especially attractive financing terms in order to attract a response from the consumers.(That is the bait) Within 3 Business Days of Completed Application (on specific transactions) The Truth in Lending Disclosure

(APR) -REPLACED BY THE LOAN ESTIMATE (TRID)

CHARM Booklet (ARM's) At Closing: Notice of Right to

rescind 2 copies Truth in Lending Act (Regulation Z, TILA) 1968

• It is important to note, however, that if an advertisement

states only the APR then the additional disclosures are not required.2. If an advertisement mentions the specific interest rate for a loan, it must also state the APR and the APR must be displayed as conspicuously as the nominal

interest rate.3. I fan advertisement shows any payment amount that results in negative amortization it must also disclose the term of the reduced payments and the actual interest rate at which the interest is accruing and the APR4.An advertisement cannot advertise only a fixed interest rate when the loans has only a limited period with a fixed rate. It must show how and when the rate can change and the APR of the loan.5. When specific loan payments are mentioned, along with the additional disclosures required by trigger terms, there must be an additional disclosure that the payment does not include additional amounts that may be required for escrow accounts such as taxes and insurance payments.6. Television radio advertisements that use any trigger terms may either disclose all of the additional items that would required in a print advertisement or include telephone number in the ad where the viewer or listener can obtain the information.7. If a print or Internet advertisement states that loan can be obtained which would exceed the fair market value of the dwelling,it must disclose that the interest on the portion of the loan in excess of the market value may not be tax deductible and that the borrower should consult with a tax professional for information specific to his or her circumstances.8. In a hybrid loan (that includes an initial fixed rate period and then becomes and ARM) if an advertisement uses the word "fixed" it must first use the term "Adjustable Rate" or "Variable Rate" or "ARM" before it can use the word "fixed" in equal prominence.9. In a graduated payment mortgage or other loan where payments will increase, an ad may not refer to fixed payments without disclosing the period for which the payments are fixed and how they will change.10.Any advertisement that uses a promotional rate (discount or teaser rate) must prominently disclose the time period for which that promotional rate or payment will apply.11. If a consumer orally asks for an interest rate, the lender or mortgage broker must quote the APR, and may quote the nominal rate.Safe Harbor Rules require separate disclosures for each "type of transaction" in which the applicant expresses an interest.

• 2nd Mortgages2. Home Improvement Loan3. A Home

Equity HELOC4. Refinancing an existing loan from a

different lender than the original loan

• day "Right of Rescission" Does Not Apply to