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NMLS Exam TILA
Questions specific to TILA
| Question | Answer |
|---|---|
| What does TILA stand for? | Truth in Lending Act |
| When did start? | 1968 as part of the Consumer Credit Protection Act |
| What Reg is TILA? | Z |
| What is the purpose of Reg Z? | APR - compare terms with other lenders Rescission - ability to cancel loan Protect - against unscrupulous lenders Advertising - Trigger terms |
| Who oversees TILA? | Board of Governors, Federal Reserve System |
| Under TILA, what is the LE called? | TIL |
| What does the TIL help consumers with? | Understanding costs and APR |
| What things does a TIL disclosure state? | You can loose your home. You are not required to complete agreement just because you received disclosures or signed an application |
| What types of loans are exempt from TILA? | A - agriculture B - business C - commercial O - organizational credit is the borrower's principal dwelling being used as security? Yes, then TILA. |
| What are the TILA disclosures? | LE or TIL APR disclosure CD or TIL closing if APR changes .00125 (1/8 of 1%) CHARM (ARMs) ARM Program Right to Rescind (HELOCs, LOCs) Sec 32 HOEPA Sec 35 HOEPA |
| How long can borrower rescind? | 3 business days |
| What is the waiting period after initial disclosures? | 7 days before closing. |
| What kind of properties are subject to Right of Rescission? | 1-4 units, primary residence, first or subordinate |
| How long can right of rescission go?` | 3 years if lender doesn't follow law. |
| If there are multiple borrower's do both need to rescind? | No, just one. |
| When does a refund of any money need to be repaid to borrower after they rescind?` | 20 days |
| Does lender, broker have to pay vendors they used if rescinded? | Yes. |
| What amendement to TILA deals with high cost loans? | HOEPA, Sec 32 |
| What does HOEPA apply to? | First and second liens 1-4 units owner occupied Purchase-money mortgages Refinances Closed-end home equity loans Open-end credit plans (i.e. HELOCs) |
| What doe HOEPA not apply to? | Reverse mortgages Construction Loans (applies to only the initial construction of a new dwelling) Loans originated and directly financed by Housing Finance Agency (HFA) Loans originated under the U.S. Department of Agriculture (USDA’s) Rural Developmen |
| What are the HOEPA tests to see if it is high cost? | Points and Fees APR Pre payment penalty |
| Under the points and fees test, what is considered a sec 32 loan?` | Points and fees exceed 5% of loan >$20k |
| Under the APR test, what is considered a Sec 32 loan? | APR exceeds APOR by 6.5% on first APR exceeds 8.5% on second |
| In reality, will a lender buy a Sec 32 loan? | No, but if you can find them you need to disclose liability to lender and borrower |
| What is TILA Sec 35 | High price loan |
| What makes a loan Sec 35? | APR exceeds APOR by 1.5% on loan amount for 1st lien, 3.5% for second lien |
| What is considered advertising under TILA | a commercial in any form that promotes a credit transaction. |
| What are the triggering terms under TILA? | Down payment Terms APR Monthly payment |
| When is the APR considered inaccurate under TILA? | above or below .125% of loan only if it goes up, don't have to wait 3 days |
| What is the ATR rule? | in 2008 the Board of Governors of the Federal Reserve System adopted a rule under the Truth in Lending Act prohibiting creditors from making higher-priced mortgage loans without assessing consumers’ ability to repay the loans. |
| What types of loans does ATR not apply to? | Open ended, LOC, HELOCS Time shares Reverse Temporary or bridge Construction < 12 months Vacant land |
| What are the 8 underwriting factors to determine ATR? | Current or expected income Current employment status Monthly mortgage payment for this loan Monthly payments on other loans on property Insurance and taxes Other debts, alimony, child support payments DTI Credit history |
| What does a QM provide creditors? | liability coverage |
| What is the HOEPA pre payment penalty test? | More than 36 months after consumption or account opening. In an amount more than 2 percent of amount prepaid |
| What act did HOEPA amend? | Tila in 1994 |
| What does a lender need to do if loan is Sec 32? | provide specific disclosures ,can’t utilize certain loan terms late fees < 4% of the past due no fee for providing a payoff statement require counseling, no fees for loan modifications, and may not recommend or encourage default on an existing loan |
| What Laws and Rules fall under TILA? | ATR QM Recission LO Comp HOEPA HPML MDIA 3/7/3 Act APR accuracy 1/8th or 1/4 |
| What is DTI threshold for QM? | 43% |
| What is max term for QM? | 30 years |
| Can a QM be a balloon? | No, no neg amortization or interest only either. |
| What is considered to determine ATR? | income, assets, employment |
| Do income, assets and employment need to be verifiable to meet ATR? | yes through third party docs such as W2, 1099, |
Created by:
Chiquituno