Fair Lending and Consumer Protection Chapter 14

The ECOA prohibits lenders from discriminating against borrowers based on race, color, religion, national origin, sex, marital status, age, or whether income comes from public assistance.

The Fair Housing Act prohibits discrimination in housing, including rental, sale, financing, and advertising, based on race, color, religion, national origin, sex, familial status, or disability.

This act encourages financial institutions to meet the credit needs of their communities, especially low to moderate-income neighborhoods.

The Truth in Lending Act (TILA) requires lenders to disclose key information about loan terms, such as APR, fees, and payment schedule, upfront so borrowers can compare options effectively.

TILA requires lenders to disclose certain information related to credit, like annual percentage rate (APR) and finance charges, in advertising before a loan is offered.

The Equal Credit Opportunity Act (ECOA) prevents lenders from discriminating against borrowers based on protected characteristics, such as race, religion, or marital status. Lenders must treat all applicants fairly, regardless of these factors.

The Fair Housing Act safeguards against discrimination in housing, including renting, buying, financing, and advertising, based on race, color, religion, national origin, sex, familial status, or disability. All people should have equal access to housing.

The Community Reinvestment Act (CRA) encourages financial institutions to provide loans and services to meet the credit needs of their communities, especially those with low to moderate income. This includes neighborhoods that might otherwise be overlooked.

Predatory lending refers to deceptive practices used by lenders to take advantage of borrowers, often targeting vulnerable populations. This includes practices like charging excessive fees, making loans with hidden costs, and refinancing loans unnecessarily.

The Real Estate Settlement Procedures Act (RESPA) offers borrowers information about closing costs and prevents hidden charges from being added in through kickbacks.

RESPA applies to almost all residential loans made by institutional lenders, encompassing all professionals involved in the closing process, such as real estate agents, mortgage brokers, lenders, and title companies.

TILA prohibits advertisements that mislead customers about loan terms and requires full disclosure if certain terms are advertised. This prevents "bait and switch" tactics, ensuring customers are provided accurate information.

TILA and RESPA have been combined into two user-friendly forms: the loan estimate and the closing disclosure, simplifying paperwork and increasing transparency during the loan process.

Under TILA's requirements, home equity loan borrowers have a 3-day right of rescission, allowing them to cancel the loan. This is known as the right of rescission, a critical safeguard for borrowers.

A predatory lending practice where a lender encourages a borrower to refinance a loan repeatedly, even if doing so is not beneficial to the borrower, and often charging excessive fees each time.

A predatory lending practice where a lender convinces a borrower to waive the requirement to make escrow payments for property taxes and insurance, leaving the borrower responsible for paying those expenses directly. This can be problematic if the borrower cannot afford the costs.

A predatory lending practice where a lender charges an excessive prepayment penalty that discourages borrowers from paying down their loans early.

A predatory lending practice where a lender includes a clause in the loan agreement that permits them to demand full immediate repayment of the loan at any time, regardless of borrower circumstances.

A predatory lending practice where a lender approves a loan solely based on the appraised value of the property, disregarding the borrower's ability to make payments. This can lead to defaults if the borrower cannot keep up with installments.

A financing charge, often a percentage of the loan amount, paid upfront by the borrower to reduce the interest rate. Paid at closing, it's often used strategically to secure a better rate, especially in competitive markets.

A predatory lending practice involving charging excessive fees or an inflated interest rate that is far higher than the market rate. This often targets vulnerable borrowers.

This type of insurance protects the lender against financial loss due to title defects, ensuring the buyer genuinely owns the property.

A lending practice involving high-interest rates and fees that often target borrowers with limited financial literacy or in desperate situations, making it difficult to repay.