TILA Residential Mortgage Disclosures

Most home mortgages are subject to the disclosure requirements of TILA. 15 U.S.C. Sec. 1638. The required disclosures must be provided to the homeowner prior to the consummation of the transaction, i.e. prior to closing. Homeowners have the right to rescind most credit transactions, including home equity loans, where the home is taken as collateral.

The name of the creditor must be provided to the homeowner, and a failure to identify the creditor entitles a homeowner to actual damages incurred if any exist. U.S.C. Sec. 1602(f); Reg. Z. Sec. 226.2(a)(17).

The Amount Financed must be disclosed and a description provided pursuant to U.S.C. 1638(a)(2)(A). Failure to properly disclose the amount financed gives rise to statutory damages, attorney’s fees, and any actual damages. U.S.C. 1640(a)(3). Its violation may also extend the consumer’s right to rescind. U.S.C. 1602(u); Reg. Z Sec. 226.23 n. 48.

The term “Finance Charge” must be used and a brief description must be provided U.S.C. 1638(a)(3); Reg. Z Sec. 226.18(d). It can be disclosed only as a total amount, there is no requirement to itemize the constituent charges, and overstating the finance charge does not violate TILA. In real estate closing charges, fees which may be excluded from the finance charge include real property and title related fees, document fees, attorney fees, notary fees, appraisal fees, and credit report fees. U.S.C. 1605(e); Reg Z 226.4(c)(7).

The APR must be accurately disclosed using the term APR. The APR is accurately disclosed when it is not more than 1/8 of 1 percentage point (.125%) above or below the actual APR. In variable-rate transactions, the description must inform the consumer that the interest rate is subject to change. U.S.C. 1638(a)(14); Reg. Z. 226.18(f). Improper disclosure of the APR is a material violation of TILA that extends the consumer’s right to rescind. U.S.C. 1602(u); Reg. Z. 226.23 n 48. Statutory damages, attorney’s fees, and actual damages are available for a violation of this provision. U.S.C. 1640(a)(3).

The Payment Schedule must be disclosed including the number of payments, the amount of each payment, and the timing of payments scheduled to repay the obligation. U.S.C. 1638(5)-(6); Reg. Z. 226.18(g). Violation of these requirements entitles the consumer to statutory damages, attorney’s fees, and actual damages. U.S.C. 1640(a)(3). Improper disclosure is also a material violation for purposes of rescission. U.S.C. 1602(u); Reg. Z. 226.23 n 48.

The total of the of the cash price of the property or services, additional charges, and the finance charge must be disclosed. U.S.C. 1638(a)(7); Reg. Z. 226.18(j). Actual damages may be available for a violation of this provision. U.S.C. 1640(a).

The lender must also disclose whether it is taking a security interest in the property, any late charges which may be imposed, any funds or rebates given to the consumer, and information regarding nonpayment, default, and the right to accelerate the maturity of the debt.

Adjustable Rate Mortgages also require additional disclosures, which will be the subject of a future post on this site. At Wilson Law Group, we hold lenders to the letter of the law, and diligently represent clients whose rights have been violated by predatory or fraudulent lending practices.

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