Which two figures are most important when determining whether a mortgage loan fits Regulation Z's definition of a higher priced mortgage loan?
In general, a first-lien mortgage is “higher-priced” if the APR is 1.5 percentage points or more than the APOR. Jumbo loans: If your mortgage is a first-lien “jumbo” loan, it is generally “higher-priced” if the APR is 2.5 percentage points or more higher than the APOR.
SUMMARY: With certain exceptions, Regulation Z requires creditors to make a reasonable, good faith determination of a consumer's ability to repay any residential mortgage loan, and loans that meet Regulation Z's requirements for “qualified mortgages” (QMs) obtain certain protections from liability.
Under the rule, a mortgage loan is an HPML if it is a closed-end transaction, secured by a consumer's principal dwelling, and has an interest rate above a certain threshold, as described in more detail below.
If the consumer is applying for an HPML to buy a flipped property, an additional appraisal is required if the price reflected in the consumer's purchase agreement is a certain amount higher than the seller's acquisition price.
The term of your mortgage loan is how long you have to repay the loan. For most types of homes, mortgage terms are typically 15, 20 or 30 years. Explore loan term options. An origination fee is what the lender charges the borrower for making the mortgage loan.
The Truth in Lending Act (TILA) of 1968 is a Federal law designed to promote the informed use of consumer credit. It requires disclosures about the terms and cost of loans to standardize how borrowing costs are calculated and disclosed.
The Truth in Lending Act (TILA) is implemented by the Board's Regulation Z (12 CFR Part 226). A principal purpose of TILA is to promote the informed use of consumer credit by requiring disclosures about its terms and cost.
HOEPA mainly covers high-cost mortgages, which are defined as loans with an annual percentage rate (APR) that exceeds by a certain percentage the average prime offer rate.
For first liens, add 1.5 % to the listed index if the loan was locked in (or re-locked) during the week following the date. For example, if your APR is 7.09 and you subtract 1.5 your answer is 5.59. If your answer is higher than the posted index, which is currently 5.09 your loan is classified as an HPML.
The goal of HOEPA is to stop abusive practices in refinances and closed-end home equity loans that have higher interest rates or high fees. If you decide to take out a "high-cost mortgage," meaning the interest rate or fees exceed specific amounts, HOEPA provides you with protection against abusive lending practices.
Who is exempt from HPML?
The TILA HPML Escrow Rule contains two exemptions for creditors that operate in a rural or underserved area: (1) the small creditors exemption, and (2) the insured institution exemption. You may qualify for these exemptions based on your lending activity in a rural area or underserved area.
The HPML Appraisal Rule applies to residential mortgages–which are not otherwise exempt from the rule–if the APR exceeds the average prime offer rate (APOR) by 1.5 percent for a first-lien or conforming loans, 2.5 percent for first-lien jumbo loans1 and 3.5 percent for subordinate loans.
Created to protect people from predatory lending practices, Regulation Z, also known as the Truth in Lending Act, requires that lenders disclose borrowing costs, interest rates and fees upfront and in clear language so consumers can understand all the terms and make informed decisions.
Your mortgage payment (PITI) will reflect the following costs: P = Principal. The amount applied to the outstanding balance of the loan. I = Interest. The amount of the charge for borrowing money.
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts.
There are two main types of mortgages: fixed-rate and adjustable-rate mortgages. Each mortgage comes with its own set of features and benefits for you to consider. Fixed-Rate Mortgage: This mortgage type has an interest rate that stays the same for the life of the loan.
Regulation Z. The Consumer Financial Protection Bureau's regulation implementing the Truth in Lending Act, it requires lenders to disclose information about a loan in a way that allows applicants to compare loan costs at different institutions.
Reg Z gives consumers the right to cancel certain credit transactions. This is called the "right of rescission" and applies to transactions that involve a lien on a consumer's principal dwelling, other than a transaction to purchase that dwelling, where the consumer has ownership interest in the property.
Common Violations
A common Regulation Z violation is understating finance charges for closed-end residential mortgage loans by more than the $100 tolerance permitted under Section 18(d).
- Annual percentage rates.
- Credit card disclosures.
- Periodic statements.
- Mortgage loan disclosures.
- Mortgage loan servicing requirements.
- Mortgage loan appraisal requirements.
What protection does regulation Z of the Truth in Lending Act provide for consumers quizlet?
In July 2008, Regulation Z was amended to protect consumers in the mortgage market from unfair, abusive, or deceptive lending and servicing practices.
The FTC enforces TILA and its implementing Regulation Z with regard to most non- bank entities.
The main factors that impact LTV ratios are the amount of the down payment, sales price, and the appraised value of a property. The lowest LTV ratio is achieved with a higher down payment and a lower sales price.
In 2010, the Dodd-Frank Act amended TILA by expanding the scope of HOEPA coverage to include purchase-money mortgages and open-end credit plans (i.e., home equity lines of credit, or HELOCs) and amended HOEPA's coverage tests.
The HOEPA excluded residential mortgage transactions (defined as a mortgage to finance the acquisition or construction of a principal dwelling, commonly known as a purchase-money mortgage);5 reverse mortgages; and open-end, home-secured credit transactions (e.g., HELOCs) from its coverage.
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