The Truth in Lending Act (TILA) aims to promote the informed use of consumer credit by requiring disclosures about its terms and cost. The Act mandates that lenders disclose the annual percentage rate (APR), the terms of the loan, and the total costs to the borrower. TILA also provides borrowers with the right to cancel certain credit transactions that involve a lien on a borrower's principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. TILA has specific provisions regarding the rights and obligations of parties in a mortgage transaction.
The Real Estate Settlement Procedures Act (RESPA) requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. RESPA also prohibits specific practices that increase the cost of settlement services, such as kickbacks and referral fees. Section 6 of RESPA provides borrowers with consumer protection during the servicing of their loans and mandates that servicers respond to borrower inquiries or complaints. Section 9 of RESPA prohibits sellers from mandating the use of a particular title insurance company, indirectly affecting the mortgage process.
The Homeowners Protection Act (HPA) was established to provide homeowners with certain rights to cancel private mortgage insurance (PMI) that is required by lenders as a condition of a residential mortgage transaction. The Act stipulates that PMI must be terminated automatically when the mortgage balance reaches 78% of the original value of the secured property, provided the borrower is current on their payments. Borrowers also have the right to request the cancellation of PMI when the mortgage balance reaches 80% of the original property value. The HPA includes disclosures that lenders must provide to borrowers concerning the terms and conditions of their PMI.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in response to the financial crisis of 2008. Title XIV of the Act, known as the Mortgage Reform and Anti-Predatory Lending Act, establishes minimum standards for mortgages and creates a 'qualified mortgage' standard for residential mortgages. It mandates that lenders assess the borrower's ability to repay the loan and prohibits unfair, deceptive, or abusive acts or practices. The Act also established the Consumer Financial Protection Bureau (CFPB), which is responsible for enforcing compliance with federal consumer financial laws and protecting consumers in the financial marketplace.