The Truth in Lending Act (TILA) is a federal law in the United States that aims to promote transparency and protect consumers in credit transactions, including mortgage loans. The law requires lenders to provide borrowers with clear and meaningful information regarding the terms, costs, and conditions of credit before the borrower enters into a credit agreement.
Under TILA, lenders are obligated to disclose certain key pieces of information to borrowers, including the annual percentage rate (APR), finance charges, the total amount financed, and the total payment amount. These disclosures enable borrowers to compare different loan offers and make informed decisions about borrowing money.
TILA requires lenders to provide a written notice within three business days after receiving a mortgage loan application. This way, lenders inform the borrower about their right to receive a copy of the appraisal report.
TILA imposes penalties for violations and provides borrowers with remedies if lenders fail to comply with the law’s requirements. It allows borrowers a right of rescission for certain types of loans, such as home equity loans and refinances. It gives them three business days to cancel the loan transaction without penalty.
In summary, the Truth in Lending Act is an important federal law that promotes transparency and consumer protection. It requires lenders to disclose key terms and costs of mortgage loans to borrowers, empowering them to make informed decisions about credit transactions.
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