The Truth in Lending Act (TILA) and how it affects residential mortgage lending is the focus of this course. TILA was enacted into law on May 29, 1968 and became effective on July 1, 1969. Regulation Z (12 CFR 226), issued by the Board of Governors of the Federal Reserve System, is the collective rules and administrative codes that implement the Truth in Lending Act. The terms Truth in Lending and Regulation Z are often used interchangeably.

The purpose of the Truth in Lending Act and Regulation Z is to promote the intelligent and informed use of credit by consumers by requiring lenders to disclose credit terms and costs in a meaningful, consistent manner. Congress found that this would lead to enhanced economic stability and strengthened competition among financial institutions and firms engaged in the extension of consumer credit. Furthermore, the act requires a stated maximum rate of interest on adjustable rate mortgage loans, imposes additional limitations and disclosures on home equity plans and high cost mortgage loans, and grants consumers a three-day right of rescission on certain mortgage loans. An official staff commentary interprets the requirements of Regulation Z.

This course is divided into two lessons, beginning with an overview of the act’s history and purpose. We then review disclosure requirements for home purchase loans and adjustable rate loans. We also take a look at special requirements for advertisements of credit and how the act is enforced. This lesson ends with a case study on the Truth in Lending Disclosure Statement.

The second lesson’s focus is on Truth in Lending requirements for some alternative mortgage loans. Practice questions, disclosure forms, and definitions are presented throughout both lessons to supplement the course materials and further facilitate your learning experience.

Course Outline:

Lesson 1 - Understanding Truth in Lending

• The Truth in Lending Act
• Truth in Lending Disclosures
• Calculating Annual Percentage Rates
• Adjustable-Rate Disclosures
• Affected Stages of the Loan Process
• Advertisements
• Enforcement

Lesson 2 - TILA and Alternative Mortgage Loans

• Home Equity Lines of Credit
• HOEPA
• Reverse Mortgages
• Right of Rescission
• Advertisements
• Disclosure Summary
• Recent Proposals and Revisions

Course Credit:
Completion of this course earns five points toward MBA's Certified Mortgage Banker (CMB), or Certified Mortgage Technologist (CMT) designations. This course also earns five points towards MBA's Mortgage Compliance (CMCP Level I) Achievement Certificate, or the Certified Residential Underwriter (CRU Level III) Specialist Designation.