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Chapter 12: The Loan and the Consumer

A federal law that requires certain disclosures when extending or advertising credit.

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TRUTH-IN-LENDING ACT

Federal regulations that implement the enforcement of the Truth-in-Lending Act.

REGULATION Z

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Truth-in-Lending ActRequires lender to show the borrower the

cost of the credit.Requirements include:

Amount financed Finance charge Annual percentage rate Total payments

REGULATION Z

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Annual percentage rate combines the interest rate with the other costs of the loan into a single figure that shows the true annual cost of the loan.

APR

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Borrower’s right to cancel a credit transaction.

Three business days after signing to back out.

Includes Saturdays.Does not apply to credit used for the

acquisition or initial construction of your principal dwelling.

RIGHT TO RESCISSION

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• Down payment• Any payment• Number of payments• Period of payments• Amount of any finance charge,

or statement: no charge for credit

• Cash price or the amount of the loan

• Down payment (or none)• Number, amount,

frequency of payments• Annual percentage rate (APR)

• Deferred payment price or total payments

Mention these Triggers disclosure

Triggering Items and Disclosures

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• Borrower• Property• Title

Lenders Qualify:

Loan Process

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Refusing to make loans in certain areas.

REDLININ

G

NoLoans!

$ $$

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Provides lender with independent means of checking borrower’s credit history.

Fair Credit Reporting Act – consumer right to their fi le at credit bureau.

Credit Scoring – method used today to evaluate credit risk.

CREDIT REPORT

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The FlipThe Old SwitchThe Contractor’s SchemeThe Ultimate LieThe Innocent InvestorTrust Me Identify ThiefFake Check/Fast Closing

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PREDATORY LENDING AND MORTGAGE FRAUD

APRCredit reportFair Credit

Reporting ActFinance charge

Liquid assetRedliningRegulation ZTruth-in-Lending

Act

KEY TERMS

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