On July 14, 2008 the Board of Governors of the Federal Reserve (Fed) released new rules under the Truth in Lending Act (TILA) - Regulation Z. The rule seeks to protect consumers from unfair and deceptive acts and practices.
The rule provides protections by establishing a new category of "higher-priced mortgage loans" defined as closed-end consumer credit transactions secured by the consumer's principal dwelling where the Annual Percentage Rate (APR) on the loan exceeds the rate on a Treasury security with a comparable maturity by 3%. This would include purchase loans, refinancings of such loans, and home equity loans, but would exclude loans for vacation properties, open-end home-equity plans, reverse mortgages, or construction-only loans.
Additionally, the rule requires earlier consumer disclosures for closed end mortgages secured by a principal dwelling and prohibits: certain acts of or practices for "higher priced" or subprime mortgage loans and loans that meet HOEPA's cost triggers; other acts or practices for all closed-end credit transactions secured by a consumer's principal dwelling; and certain misleading or deceptive advertising practices in connection with closed-end mortgages.
MBA has long supported better and more timely disclosures to consumers as well conceived disclosures empower consumers to make the best choices and foster market competition to provide consumers the best products at the best prices.
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