New rules added to Truth in Lending Act

Shared by Jerry on Fri Oct 02, 2009 5:11 am
Hi all, The Federal Reserve has amended the Regulation Z, also known as The Truth in Lending Act (TILA), and added a new set of consumer protection rules to the existing regulation. These rules apply to all lenders and add a few important protections for higher priced mortgage loans. Under the new rules, the lenders will now have to verify the borrowers' credit and income to determine their ability to repay loans. The lenders are required to set up escrow accounts for payment of property taxes and homeowner's insurance for all first lien mortgages. The rules also ban prepayment penalty on loans, if the payment is expected to change in the initial 4 years. For other types of higher priced mortgages, the prepayment penalty period cannot extend beyond 2 years. These new rules have taken effect from Oct. 01, 2009. Thanks, Jerry Source: http://www.cnbc.com/id/33094291

Community Members Opinion

sunnyca2009

Joined: 04 Aug 2009

Posts: 1737

36.13 Dollars($)

Posted: Fri Oct 02, 2009 8:11 pm Post subject:

"Lenders are required to set up escrow accounts" Does this apply to people who do 20% down payment or only people who are makign less than 20% down

jameshogg

Joined: 20 Dec 2005

Posts: 4291
Location: nevada

509.34 Dollars($)

Posted: Fri Oct 02, 2009 8:51 pm Post subject:

Hi Jerry, Thanks for sharing this important news. The new rules would definitely help both the mortgage borrowers as well as the lenders. The new changes will help protect the consumers from unfair practices of the lenders. Also, it would help restoring confidence of the borrowers in the mortgage system. The new changes in TILA will also ensure that lenders do not indulge in deceptive or misleading mortgage advertising. For example, advertisements saying "a loan has a low fixed rate" when it really doesn't is banned under the new rules. Hi Sunny, As far as I know, till date the setting up of escrow accounts depended on the discretion of the lender. It did not depend upon the fact whether or not you paid 20% down. However, with the coming up of new rules, it has become mandatory for the creditors to set up escrow accounts for all first lien mortgage loans. Thanks

sunnyca2009

Joined: 04 Aug 2009

Posts: 1737

36.13 Dollars($)

Posted: Sun Oct 04, 2009 12:01 pm Post subject:

What I have hard are seen, is the lender wants a escow accoutn if you did nto doa 20% down, but if it is 20% down, they do nto enforce it


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