Mortgage Lending Transactions Chapter 8

Truth in Lending Act Overview

• Truth in Lending Act (TILA) is federally mandated, ensuring consumers receive clear and accurate information about borrowing costs.
• Compliance is essential for lenders engaging in certain types of credit transactions to protect consumers.

Exemptions from Truth in Lending Act

• Lenders extending credit only once a year and those not securing transactions with real properties are usually exempt from TILA compliance.
• Individual unlicensed lenders making multiple loans per year may not be subject to the same disclosure requirements as licensed institutions.

Loan Types and Installment Payments

• Loans payable in more than four installments are covered under TILA, ensuring borrowers understand their payment obligations.
• Installments/payments under that threshold do not trigger TILA compliance.

Exempt Loans

• Loans for purchasing farm machinery, car dealership inventory expansions, and real estate investments have exemptions from TILA disclosures, emphasizing the scope of the act.

Required Disclosures

• Key disclosures under TILA include the creditor’s identity, the amount financed, and applicable finance charges.
• Personal details such as the creditor's race are not mandated disclosures.

Finance Charges

• Finance charges encompass various aspects such as loan fees, interest, and some cost elements but exclude credit report costs and mortgage guaranty premiums.
• Understanding what constitutes finance charges helps consumers better evaluate loan offers.

Misleading Advertising Practices

• Advertising credit terms which are unavailable to consumers is deemed bait and switch, a deceptive marketing tactic discouraged by TILA.
• Awareness of such practices aids in consumer protection against fraudulent lending scenarios.

Trigger Terms for Disclosure

• Specific terms, including loan duration, monthly payment amounts, and required down payments, necessitate full disclosure under TILA, aimed at maintaining transparency for consumers.

Enforcement Responsibility

• The Federal Trade Commission (FTC) is the primary body responsible for enforcing the Truth in Lending Act, ensuring adherence to consumer protection standards in lending practices.

This quiz assesses your understanding of disclosures in mortgage lending transactions, particularly focusing on the Truth in Lending Act. Test your knowledge of compliance requirements and key aspects of federal regulations in this area.