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What are the 3 purposes of the TILA?
- 1. promote the informed use of credit by clearly disclosing terms & costs of credit
- 2. help consumers better compare the terms of loans offered by various creditors through early disclosures
- 3. provide consumers with the right to cancel (rescind) certain loans that involve liens on primary dwellings.
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What loan types of loan isn't covered in "high cost loan" definitiation?
1)rules not cover loans to buy or build a home, reverse mortgages or revolving home equity lines of credit
2)refinancing and home equity installment loans
1)rules not cover loans to buy or build a home, reverse mortgages or revolving home equity lines of credit
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What act is "High Cost Loans" under?
The homeownership and Equity Protection Act (HOEPA)
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What is "cost trigger"?
When the total points and fees payable by the consumer at or before closing, exceed larger of $579 or 8% of the total loan amount.
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Under HOEPA disclosures if loan high cost trigger the borrowers need to receive the following 3 disclosures at least 3 busn day before closing:
- 1. A written notice stating that the loan need not be completed (3 busn days cooling period to decide whether to sign the Section 32 disclosure)
- 2. The notice must warn the borrower the creditor will have a mortgage on the home
- 3. lender must disclosure the APR
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High cost prohibited practices?
- 1. All ballon payment
- 2. negative amortization
- 3. default interest rate higher than pre-default rates
- 4. most prepayment penalties
- 5. a due on demand clause
- 6. refinance into another HOEPA loan within 12 months unless new loan is in the best interest of borrower
- 7. open-end loan (home equity line of credit)
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What is a Higher-priced mortgage loan?
Any mortgage (purchased or non-purchase money) secured by a consumer's principal dwelling with an APR exceeding the "Average Prime Offer Rate" (APOR), on prime loans by at lest 1.5% points on 1st lien loans & 3.5% points on subordinate-lien loans.
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What does a "higher-priced mortgage loan" prohibited from?
- 1. engaging in a pattern & practice of relying on the collateral securing the loan without regard to the consumer's ability to repay the loan
- 2. relying on a consumer's income & assets without verifying such amounts through reasonable reliable third-party documents
- 3. imposing any pre-payment penalty if the consumer's payment can change in the 1st 4 years of the loan term.
- 4 originating 1st lien, higher priced loans, without establishing an escrow acount for property taxes & homeowners insurance.
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Who regulated the Homeowner Protection Act of 1998 (HPA)?
Federal Reserve Board
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What loans aren't covered under the HPA?
VA or FHA loans
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What 2 options do HPA provided on which PMI may be cancelled?
- 1. automatic termination: once 78% of original value of property is reach; borrower must be current in payment and lender must cancel coverage within 30 calendar days of automatic termination date
- 2. By Request: homeowner request cancellation of PMI once home reaches 80% ltv. lener is not required to honor request by law. will consider based upon pay history, timeline or subordinate financing.
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When must servicer required by HPA to notify a cosumer of their rights? (3)
- 1. at closing closing & 2. on an annual basis, servicer must disclose to the consumer their rights to request cancellation of PMI coverage
- 3. upon cancellation, service must notice consumer in writing that PMI has been terminated & no further premiums are due
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Who regulated Truth in Lending (Reg Z)?
- Agency: board of governors of the Federal Reserve System (FRB)
- Enforecement Agency: Federal Trade Commission (FTC)
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What are Reg Z prohibited for ALL closed-end mortgage loans that are secured by the borrower's primary dwelling (2)?
- 1. creditors & mortgage brokers from, coercing, influencing, or encourgaging an appraiser to misrepresent the value of the property.
- 2. servicers from, failing to credit a payment to the consumer's account as of date of its receipt; or failing to provide a payoff statement within a reasonable amount of time after a request. Frobids the "pyramiding" of late fees.
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What are prohibited under Reg Z for all closed-end mortgage loans secured by a dwelling, not just principal residence?
- prohibit against misleading & deceptive advertising practices.
- 1. representing that an interest rate or payment is fixed when in fact , it can change
- 2. advertisers provide accurate & balanced information in a "clear & conspicuous" manner, about rates, payments and other loan features
- 3. specific requirements that advertisements state all applicable rates or payments with equal prominence and in close proximity to any "promotional", "teaser" or introductory rate or payment
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The Equal Credit Opportunity Act (ECOA) is Regulation___, established in ___, regulated by___?
Regulation B, in 1974, regulated by FTC (Federal Trade Comission) & Federal Reserve
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The Fair Housing Act Act is Regulation___, established in ___, regulated by___?
FHA is Title VIII, 1968 Civil Rights Act, enforced by HUD
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The Home Mortgage Disclosure Act is Regulation___, established in ___, regulated by___?
Regulation C,
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The Community Reinvestment Act is Regulation___, established in ___, regulated by___?
regulation BB
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What is purpose of ECOA?
provide the availability of credit to all without regard to color, national origin, sex, marital status or age (provided applicant has capacity to cntract); to the fact that all or part of applicant's income derives from public assistance program
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Under ECOA, creditors to notify applicants of action taken on thier application within ___ calendar days? (adverse action, withdrawal, approval, counteroffer, incomplete file, turn-down, etc): Adverse Notice must be provided in writing
30 days
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What are required under ECOA?
- 1. notice of actions..adverse, etc
- 2. reporting credit history in the names of both spouses on an account
- 3. retention of records of credit applications (records must be retaind for a minimum of 24 months period; 25 can destroy)
- 4. collection of info about applicant's race & other personal characteristics
- 5. providing applicants with copies of appraisal reports used in connection with credit transactions
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Can FHA discriminated against AGE? ECOA?
yes, FHA can discriminated. ECOA can't discriminated against age.
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Can a creditor discourage application?
No, can't discourage people from applying for loan
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What can a creditor ask an application about & NOT ask about?
Can ask: Martial Status;
can't ask about alimony , child support, or separation maintenance income (but can use those incomes if applicant wants to); SEX, childbearing, childrearing, race, color, religion, national origin
But is required to ask about the liabilities of alimony, child support or separation maintenance; ask about applicant's permanent residence & immigration status
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