Truth In Lending Act Case Study

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The Truth In Lending Act was established 30 years ago, and governed mortgage loan disclosure procedures. New rules regarding procedures set forth by the Truth In Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) went into effect on October 3, 2015. The rules combine provisions previously set forth by both acts, and combine rules regarding mortgage disclosures. The new guidelines are published in a document that encompasses nearly 2,000 pages and affects every agency that deals with mortgage loans, from banks and brokers, to real estate agents and borrowers. Many real estate agents do not have time to sift through this cumbersome document, but it is important to know what has been updated in the amendments. Real estate agents should be aware of a few key changes in order to help…show more content…
These disclosures must be provided for closed-end credit transactions that are secured by real property. The Good Faith Estimate and Initial Truth-in-Lending Disclosures will be combined and replaced by a document called the Loan Estimate. The HUD-1 Settlement Statement Form and the final Truth-in-Lending Disclosure Form are being combined into a single five-page Closing Disclosure Form. These changes cut down on paperwork and processing time, and give borrowers a more concise set of documents that explain their rights and obligations as pertaining to the mortgage loan and repayment process.

One other important note involves mortgage loans for construction-only, or loans that are secured by vacant land or a parcel of 25 or more acres. While these loans were previously not subject to RESPA provisions, but fell under TILA guidelines, they all now fall under the new rules, and agents should pass this information on to buyers.
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