Following is a brief description of the major laws and regulations meant to govern the mortgage lending process, protect mortgage borrowers, and govern the practices of financial institutions with regard to mortgage lending and protection of borrower financial information. All of the following are federal laws and regulations. Many states may have additional laws governing the mortgage process and protecting consumers.
Truth in Lending Act
Enacted in 1968, the Truth in Lending Act (TILA), which is part of the Consumer Credit Protection Act, is a federal law that sets forth certain written disclosure requirements. Disclosures required by the act include:
The Truth in Lending Act also sets forth advertising requirements for lenders as well as rescission rights for consumers. The rescission rights in TILA allow consumers 3 business days to back out of a loan transaction.
For additional information on the Truth in Lending Act see: FDIC Consumer Protection.
Fair Housing Act
Also adopted in 1968, the Fair Housing Act prohibits discrimination in housing related transactions (purchase and rental) based upon race, color, sex, religion, national origin, familial status (with or without children), or handicap.
|Lenders advertising their compliance with the act will display the Fair Housing Logo as well as the "Equal Housing Lender" slogan.|
For more information see: Fair Housing--it's Your Right
Real Estate Settlement Procedures Act
Adopted in 1974, the Real Estate Settlement Procedures Act (RESPA) is another consumer protection law. It covers purchase loans, assumptions, refinance loans, property improvement loans, and equity lines of credit for one to four unit residential properties.
RESPA serves two functions:
The required disclosures spelled out by RESPA include:
RESPA also provides further consumer protection by prohibiting kickbacks, fee-splitting, unearned fees in return for referrals for settlement services; prohibiting the seller from requiring the use of a certain title insurance company; and places limits on escrow accounts.
For more information see: Your Rights and the Responsibilities of the Mortgage Servicer or RESPA Statute Real Estate Settlement Procedures Act
Equal Credit Opportunity Act
Adopted in 1975, the Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. ECOA regulates application content, acceptable and unacceptable questions, and verbal or written discouragement of an application.
Home Mortgage Disclosure Act
Adopted in 1975, the Home Mortgage Disclosure Act (HMDA) requires that lenders report public loan data on both approved and denied loans.
For more information see: the Home Mortgage Disclosure Act (HMDA) web site
Community Reinvestment Act
Enacted in 1977, the purpose of the Community Reinvestment Act (CRA) is to encourage financial institutions (insured depository institution's) to help meet the credit needs of the communities in which they serve, including low- and moderate-income neighborhoods. The act requires that insured depository institution's be periodically evaluated.
For more information see: the Community Reinvestment Act (CRA) web site
Fair Credit Reporting Act
Adopted in 1978, the Fair Credit Reporting Act (FCRA) is designed to promote accuracy and ensure the privacy of the consumer credit information from consumer reporting agencies such as credit bureaus. The act has been amended numerous times since enactment.
For more information see: Fair Credit Reporting
New Homeowner's Protection Act
Adopted in 1998, the Homeowner's Protection Act (HPA), also known as the PMI Act, establishes rights for homeowners and rules for lenders regarding private mortgage insurance (PMI) cancellation. The act applies to mortgages obtained on or after July 29, 1999.
For more information see: Private Mortgage Insurance (PMI) New Law Requires Lenders to Cancel PMI
Fair Debt Collection Practices Act
Adopted in 1977, the Fair Debt Collection Practices Act requires that debt collectors treat borrowers fairly by prohibiting certain methods of debt collection. It prohibits unfair, deceptive, or abusive practices, including over-charging, harassment. It also prohibits disclosing consumers' debt information to third parties.
For more information see: Fair Debt Collection
Adopted in 1999, the Gramm-Leach-Bliley Act includes provisions to protect consumers' personal financial information. It has three parts pertaining to privacy requirements:
For more information see: The Gramm-Leach Bliley Act