Real Estate Truth-in-Lending

The real estate Truth-in-Lending Act, TILA, or Regulation Z was originally passed to provide borrowers with as much detail as possible regarding the costs and terms of any loan they apply for so they can make an informed decision about their credit, loan, and which lender they would rather use.  Regulation Z also empowers consumers by giving them the right to withdraw from some credit or loan contracts that expose their primary residence to liens or legal claims.

The U.S. Congress passed the original real estate Truth-in-Lending Act in 1968 as part of the Consumer Credit Protection Act and issued by the Board of Governors of the Federal Reserve System to give borrowers more control and power with their credit, loans, and mortgages by proving more transparency in lending practices.  The TILA dictates that creditors and lenders must provide consumers with a written disclosure of all the costs related to their mortgage loan.  Lenders must provide information like the size of the credit line, finance charges, annual fees, and the annual percentage rate or the APR due on their loan.

The real estate Truth-in-Lending Act also implements regulations of the Competitive Equality Banking Act of 1987 designed to impose strict information-collection requirements on lenders and creditors and to regulate certain credit card practices.  Another purpose of Regulation Z is to encourage the responsible use of consumer credit by requiring means for fair and timely resolution of loan or credit billing disputes.  TILA requires that lenders notify a borrower of the maximum interest rate and for it to be stated in variable-rate contracts secured by the borrower's residence.

The real estate Truth-in-Lending Act imposes limitations on home equity loan plans and mortgages that are subject to certain acts or practices in connection with credit secured by the borrower’s primary residence.  That includes loans or equity lines of credit where the APR at the end of the loan is over 8 percentage points for first-lien loans and over 10 percentage points for subordinate-lien loans.  The limitations imposed by TILA also include the total points and fees owed by the borrower at or before the closing of a mortgage or loan if they exceed 8% of the total loan amount.

The real estate Truth-in-Lending Act, TILA, or Regulation Z applies to lenders that offer or extend loans or lines of credit the meet certain conditions including:

  • The line of credit or loan is offered or extended to mortgages or home borrowers
  • The offer or extension of line of credit or loan is done on a regular basis
  • The line of credit or loan is subject to a finance charge
  • The line of credit or loan is stipulated to be paid in a written contract in more than four installments
  • The line of credit or loan is primarily for personal, family, or household purposes

 

If you have any questions regarding the real estate Truth-in-Lending Act or how it may apply to your mortgage loan or equity line of credit, contact a real estate lawyer today for answers.

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