Though state and local laws usually regulate specific aspects of home mortgages, such as mortgage flipping, prepayment penalties and amortization regulations, the federal government has provided more general steps to protect customers during the home-buying procedure. Laws like the Truth-in-Lending Act and Real Estate Settlement Procedures Act regulate lender disclosures to potential borrowers, while coverages like the Fair Housing Act ensure that discrimination doesn’t prevent customers from attaining housing.
Truth-in-Lending Act
The purpose of the Truth-in-Lending Act, enacted in 1968, is”to protect borrowers by making sure they are aware of the terms and costs of charge, so they can knowledgeably compare different loans and lenders” The legislation demands lenders disclose all facets of home loan loans, such as annual percentage rate (APR), the accurate quantity of the loan, any finance charges, overall sales cost with down payment contained along with the total amount that borrowers will pay over the life of the loan, including interestrates It also says that borrowers are allowed to decline a mortgage loan offer.
Fair Housing Act
The Fair Housing Act enforced and is mostly regulated by the Department of Urban and Housing Development. This legislation provides protection from housing discrimination based on race, age, gender, religion, handicap or family status. The legislation provides specific regulations such as mortgages. It prohibits lenders from denying mortgages into a customer based on some of the above aspects. Mortgage lenders are also prohibited from discriminating by altering mortgage terms, decreasing or altering appraisals and not forgetting to give customers information.
Real Estate Settlement Procedures Act
The Real Estate Settlement Procedures Act (RESPA), which became law in 1974, is very much like the Truth-in-Lending Act. Under RESPA, mortgage lenders need to provide consumers with specific documents during the application procedure, like a Special Information Booklet, Good Faith Estimate and Mortgage Servicing Disclosure Statement. The files must be received at the time of application or within three days of applying. The legislation also requires lenders to provide certain documents during the closing procedure, like a HUD-1 statement, which shows the true closing costs in contrast to the Good Faith Estimate, in addition to an Affiliated Business Arrangement (AfBA) Disclosure. When applicable, Escrow Statements along with a Servicing Transfer Record are also required by legislation.