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Truth in Lending: 1.2.1 Original Act

In 1968, after years of legislative study, fact-finding, compromise, and struggle, the United States Congress adopted and President Lyndon B. Johnson signed the Consumer Credit Protection Act (CCPA), which consisted of the Truth in Lending Act (Title I) and Restrictions on Garnishment (Title III).27 Passage followed decades of developments at the state level, which informed these federal developments.28 The Truth in Lending Act was landmark legislation.

Truth in Lending: 1.2.13.2 Amendments to Other Federal Mortgage Loan Related Laws

In addition to the TILA amendments in Public Law No. 115–174, the new law also includes provisions affecting other federal statutes relevant to practitioners handling mortgage cases. As described in NCLC’s Mortgage Lending,147 these changes can be found in the SAFE Mortgage Licensing Act; the Home Mortgage Disclosure Act (HMDA); and the Financial Institutions, Reform, Recovery and Enforcement Act (FIRREA) regarding appraisal standards.

Truth in Lending: 1.2.11 The Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter the Dodd-Frank Act) was signed into law.116 As part of the sweeping changes in this financial reform bill, Congress amended TILA in title XIV of the Act to include a variety of substantive provisions relating to mortgage lending and servicing, and to provide for additional damages recoveries for certain of these violations.

Truth in Lending: 1.3.3 Effective Date of Title XIV Amendments That Require Implementing Regulations

Where title XIV requires regulations, the corresponding statutory provision takes effect on the date the regulations take effect.162 The same should be the case for any provision that cannot go into effect until another statutory provision with implementing regulations also goes into effect. An example would be where one provision requires disclosure of a term that is defined in another section, but where that other section requires regulations to implement the definition.

Truth in Lending: 1.5.3.3.1 General authority

The Truth in Lending statute authorizes the CFPB to depart from the statute in several clauses. Under 15 U.S.C. § 1604(a), the CFPB may implement regulations that “contain such classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of transactions,” although the statute explicitly carves out high-cost loans from this rule. (A separate statutory provision, 15 U.S.C.

Truth in Lending: 1.3.4.2 Most Court Decisions Use a January 21, 2013 Effective Date

One early federal court RESPA decision finds that Dodd-Frank § 1400(c)(3), which sets out a January 21, 2013 effective date, refers not just to paragraphs (c)(1) and (c)(2), but to any Dodd-Frank title XIV provision, whether rulemaking is required or not.183 It reached this conclusion because the title for section 1400(c) included a semi-colon instead of a colon: “Regulations; Effective Date.” The court found the use of a semicolon to mean that section 1400(c)(3) did not only refer back to paragraphs (c)(1) and (c)(2), but instead referred to

Truth in Lending: 1.5.3.1 History of Regulation Z and the FRB Interpretations

As Congress has recognized since the inception of TILA, the oversight of consumer credit is a full time job, beyond the capacity of a legislature. As a result, Congress delegated broad authority for the implementation of TILA to the Federal Reserve Board.219 The FRB responded by promulgating a comprehensive set of Truth in Lending rules known as Regulation Z, which has been in effect, in various forms, since July 1, 1969.

Truth in Lending: 1.3.4.1 Statutory Language Is Ambiguous

Dodd-Frank § 1400(c)(3) is ambiguous as to whether its January 21, 2013 effective date applies to a statutory provision where implementing regulations are not required.180 The key question is whether section 1400(c)(3) that sets the January 21, 2013 effective date refers only to section 1400(c)(1) and (c)(2) and thus to statutory provisions requiring regulations, or whether it applies to any Dodd-Frank title XIV provision, even those not requiring regulations.

Truth in Lending: 1.7 Getting Started: Quick Reference Checklist (Closed-End)

Evaluating a consumer credit transaction for TILA disclosure rule compliance consists at a minimum of three tasks: evaluating the accuracy of the numerical disclosures on their face; determining whether those numerical disclosures were made in accordance with TILA rules (including assessing the legitimacy of charges imposed); and evaluating the adequacy of the non-numerical disclosures under TILA rules.

Truth in Lending: 1.5.3.4.1 Introduction

On December 8, 2004, the FRB issued an advance notice of proposed rulemaking.295 This notice signaled the beginning of the FRB’s most systematic review of Regulation Z since 1980.296 The first phase produced final rules governing open-end credit with an emphasis on credit card transactions.297 The second phase addressed closed-end credit.298 Although the FRB issued some proposed rules as part of this

Truth in Lending: 1.2.13.1 Mortgage Lending Amendments to TILA

In 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018,144 creating a handful of exceptions to Dodd-Frank’s TILA protections for mortgage borrowers. The TILA-related provisions are discussed below, followed by an analysis of the applicable effective dates.

Truth in Lending: 1.5.3.4.7 Other post-2010 rulemaking

The CFPB published an interim final rule on appraiser independence on October 28, 2010, effective in part on December 27, 2010, and in part on April 1, 2011.328

In 2012, in order to conform to an adverse court decision, the CFPB adopted an interim final rule that permits subprime fee harvester credit cards to charge pre-account opening fees that exceed the cap on fees that Congress enacted in 2009.329 It finalized the revision in 2013.330

Truth in Lending: 1.1.2 The Role of Truth in Lending Act in Consumer Advocacy

A working knowledge of the Truth in Lending Act (TILA) can help attorneys evaluating clients’ prospective credit transactions. A TILA analysis will reveal whether a transaction is a sound value, a Christmas tree loan, loaded with expensive and unnecessary charges,13 or a potential disaster for the borrower, such as a loan with an unaffordable balloon payment or an unmanageable variable rate feature.14

Truth in Lending: 1.5.3.2 Validity of Regulation Z and Official Interpretations

The authority of the various FRB interpretations of TILA and Regulation Z has been the subject of substantial litigation.230 The issue first reached the Supreme Court in 1973 in Mourning v. Family Publications Service,231 in which the court upheld the FRB’s authority to promulgate the “four installment rule” in Regulation Z as a measurement for when a business “regularly” extends credit and is therefore subject to TILA.

Truth in Lending: 1.2.7 The Higher Education Opportunity Act of 2008 (HEOA)

The Higher Education Opportunity Act of 2008 (HEOA)86 eliminated the $25,000 TILA limit for private education loans87 and exempted some transactions.88 The HEOA also added numerous new disclosure requirements to TILA that apply to private student loans.89 The Federal Reserve Board issued regulations in August 2009.90 Effective February 14, 2010, lenders making pri

Truth in Lending: 1.5.4 Case Law

The importance of case law to the Truth in Lending Act is similar to its importance in other fields of law; the courts are the final arbiters of how to interpret TILA and its associated regulations.334 One difficulty is determining the value of the numerous pre-Simplification cases335 under the current law. There is no one answer to this problem because the amendment of TILA and Regulation Z was not uniform.

Mortgage Lending: 12.6 Wraparound Mortgages

A wraparound mortgage (also known as an “all-inclusive,” “hold harmless,” or “overlapping” mortgage loan55) is a junior mortgage that secures a promissory note, the face amount of which is equal to the sum of (1) the principal balance remaining on the existing senior mortgage and (2) any additional money advanced by the wraparound lender.56 Wraparound mortgages should be closely examined because exaggerating the loan principal may hide extra interest.

Mortgage Lending: 10.3.4 Fees

HECM loans have a number of costs and fees that are borne by the borrower. Borrowers may be charged for document preparation, appraisals, title and tax searches, flood zone searches, inspection fees, tax reporting services, attorney fees, and origination fees. Many of these costs are financed with the loan proceeds.

Mortgage Lending: 10.3.5 Payment Obligations

HECM loans do not require the borrower to make periodic payments. Instead, over time, the reverse mortgage balance rises as a result of additional advances, accruing interest, and fees. Payment is due only at maturity, which occurs when the last borrower dies, sells, or permanently relocates from the home.78 A loan may also be called due and payable if the borrower defaults on their obligations (such as by defaulting on their property taxes or homeowner’s insurance premiums).

Mortgage Lending: 10.3.7 Other Loan Requirements

Disclosure of Available HECM Options. As of 2017, lenders are required to inform potential HECM borrowers of all the HECM products, features, and options that the HUD insures, irrespective of the particular HECM products offered by the lender.100