Fair Lending and Consumer Protection Chapter 14
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Questions and Answers

The Equal Credit Opportunity Act applies to all consumer credit, including residential mortgages.

True

The Fair Housing Act prohibits discrimination based on religion and sex.

True

The Community Reinvestment Act has goals to prevent redlining practices.

False

The Truth in Lending Act is often abbreviated as TILA.

<p>True</p> Signup and view all the answers

The Real Estate Settlement Procedures Act prohibits certain practices in real estate settlements.

<p>True</p> Signup and view all the answers

Which law ensures that lenders do not discriminate based on the source of an applicant's income?

<p>Equal Credit Opportunity Act</p> Signup and view all the answers

Which of these laws is most directly concerned with preventing redlining?

<p>Home Mortgage Disclosure Act</p> Signup and view all the answers

Which Act includes advertising requirements related to the cost of credit?

<p>Truth in Lending Act</p> Signup and view all the answers

What does the Real Estate Settlement Procedures Act primarily regulate?

<p>Practices in real estate settlements</p> Signup and view all the answers

Which Act specifically aims to encourage financial institutions to meet the credit needs of the communities they serve?

<p>Community Reinvestment Act</p> Signup and view all the answers

What is a demand feature in a loan, also known as?

<p>A discretionary acceleration clause</p> Signup and view all the answers

What is the practice of 'loan flipping' considered as?

<p>Predatory lending practice</p> Signup and view all the answers

In what lending area are predatory practices commonly found?

<p>Subprime loans, especially home equity loans and refinances</p> Signup and view all the answers

Which action is permitted under the Real Estate Settlement Procedures Act?

<p>Charging fees for preparing impound account statements.</p> Signup and view all the answers

What practice involves a lender charging an excessively high interest rate and inflated origination fees?

<p>Fee packing</p> Signup and view all the answers

Requiring a borrower to pay a large, single premium at closing for which insurance is considered predatory?

<p>Credit life insurance</p> Signup and view all the answers

Which type of borrower is least likely to be targeted by predatory lenders?

<p>A buyer seeking to purchase a more expensive house.</p> Signup and view all the answers

Which federal law includes provisions that limit the practice of predatory lending?

<p>Truth in Lending Act</p> Signup and view all the answers

What does the Real Estate Settlement Procedures Act (RESPA) primarily aim to do?

<p>Provide borrowers with information about closing costs and prohibit kickbacks</p> Signup and view all the answers

Which type of loan transaction is exempt from RESPA?

<p>Loans for agricultural purposes</p> Signup and view all the answers

Study Notes

Fair Lending and Consumer Protection

  • Learning Objectives: After completing this lesson, students should be able to describe the purpose of the Equal Credit Opportunity Act, list discriminatory acts and protected classes under the Fair Housing Act, explain the goals of the Community Reinvestment Act, discuss the role of the Home Mortgage Disclosure Act in preventing redlining, summarize the purpose of the Truth in Lending Act (TILA), describe TILA's advertising requirements, and explain how the right of rescission works, explain the prohibited practices provisions in the Real Estate Settlement Procedures Act (RESPA), understand the TILA-RESPA Integrated Disclosure rules, the associated deadlines, define predatory lending and give examples of predatory practices, and summarize the laws regulating predatory lending.

Suggested Lesson Plan

  • Give students Exercise 14.1 to review the previous chapter, "Seller Financing."
  • Provide a brief overview of Chapter 14, "Fair Lending and Consumer Protection," and review the learning objectives.

Fair Lending Laws

  • Equal Credit Opportunity Act (ECOA): ECOA applies to all consumer credit, including residential mortgages, and prohibits discrimination.
  • Fair Housing Act: Prohibits discrimination based on characteristics like race, color, national origin, sex, religion, disability, and familial status, in residential transactions.
  • Community Reinvestment Act (CRA): Requires depository institutions to make loans to low- and moderate-income borrowers in the communities where they do business.
  • Home Mortgage Disclosure Act (HMDA): Requires large lenders to disclose certain loan originations/purchases to the federal government, to monitor for redlining activities.

Consumer Protection Laws

  • Truth in Lending Act (TILA): Requires certain disclosures to loan applicants, such as finance charges and APR. TILA also covers certain advertising requirements.
  • Real Estate Settlement Procedures Act (RESPA): Provides borrowers with information about closing costs and prohibits kickbacks that increase settlement costs.

Predatory Lending

  • Predatory lending practices are ways lenders take advantage of borrowers, including predatory steering, fee packing, equity stripping, loan flipping, disregarding borrower ability to repay, balloon payments, loan in excess of value, negative amortization, fraud, high-pressure tactics, and advance loan payments.
  • Predatory lending laws : Federal and state laws aim to prevent predatory lending practices.

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Description

Test your knowledge on Fair Lending and Consumer Protection with this quiz based on Chapter 14. You'll explore essential laws such as the Equal Credit Opportunity Act, Fair Housing Act, and the Community Reinvestment Act. Understand the practices and regulations that aim to protect consumers in lending scenarios.

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