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The Truth in Lending Act, commonly referred to as "TILA," was originally enacted in 1968 based upon a Congressional finding that economic stabilization would be enhanced and competition between financial institutions and other lenders engaging in the extension of consumer credit would be strengthened by borrowers' informed use of credit. Congress specifically found that the informed use of credit arises from the consumers' awareness of the cost of that credit.

TILA's stated purpose is to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him or her and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.

One of the Bills most sweeping mortgage reform bills this year, Assembly Bill 260, bans so-called subprime "negative amortization" loans where the principal balance grows even as the borrower makes payments. It also prevents mortgage brokers from collecting upfront fees prior to funding a loan for originating subprime loans and those with pre-payment penalties. The bill also limits the size of pre-payment penalties for
borrowers who pay off their loans early.

Lastly, it requires that mortgage brokers have a higher degree of duty to borrowers – that is, they must place the "economic interest of the borrower ahead of the broker's own economic interest" when making loans. Skilled Brokers already do this, of course. And that provision is especially opposed by the California
Association of Mortgage Brokers. Fred Arnold, a Santa Clarita-area broker and the group's past president, said the bill's definition of fiduciary duty is vague and an invitation to "frivolous lawsuits."

Recent changed provisions of the federal law sees to it that that credit card companies should not send credit cards to individuals who did not apply for it. Further, they regulate the disclosure processes as well. Most borrowers find this important because it allows them to know the exact charges they need to settle. This will give the borrowers the chance to prepare for the needed amount.

The important Arizona law at issue is codified at A.R.S. Section 33-729(A), which provides that if a mortgage is given to pay the purchase price of the home, the lender may not pursue any action against a borrower – besides foreclosing on the deed of trust securing the mortgage. Unfortunately for many second (or third or fourth) mortgage lenders, due to current market conditions there are frequently no funds available beyond the amounts owed on the primary mortgage.

These changes have helped protect the interest of the consumers. With it, the borrowers will only pay for the services rendered to them. Not only that, they will also have enough time to review the disclosures given to them. They can use it to compare with other lenders. They can choose the term that suits them better. They can do this because they are not obliged to continue their transaction with a lender even if they have already been given the TIL and other information. They can cancel the transaction if they feel that it is not good for them

Resource Author Francisco R. Higueras
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Tags: Real Estate Law