MI Regulations

Below are regulations that affect the mortgage and mortgage insurance industries.

Homeowners Protection Act

Went into effect in July 1999 and requires all mortgage lenders to automatically cancel mortgage insurance when the principal balance of the borrower’s mortgage reaches 78% of the original value of the property. In addition to automatic termination, this law gives the borrower the right to ask for cancellation when the principal balance of their mortgage is scheduled to reach 80%.

Fair Housing Act

Covers all activities of the real estate community including lenders. It is designed to eliminate discrimination in order to protect consumers against unfair activities, which would deny housing. It specifically prohibits discrimination based on race, color, religion, sex, handicap, familial status, or ethnicity.

Fair Credit Reporting Act (FCRA)

Applies to all mortgage lenders and is designed to ensure accuracy and protect the privacy of consumers. It limits to whom a credit reporting agency can furnish reports, and places disclosure obligations on those who use consumer credit reports. It also permits an individual to receive a copy of his or her report from the credit agency and dispute any information believed to be inaccurate.

Equal Credit Opportunity Act (ECOA)

Also known as Regulation B, ECOA was designed to ensure financial institutions and other lenders do not discriminate in the evaluation of an applicant’s creditworthiness. It requires all lenders and other creditors to make credit equally available without discrimination based on race, color, religion, sex, ethnicity, age, marital status, or receipt of public assistance. ECOA also makes it unlawful to discriminate on the basis of the applicant’s “exercise of rights under the Consumer Protection Act.” In short, its purpose is to require financial institutions to make credit equally available to all creditworthy applicants.

Real Estate Settlement Procedures Act (RESPA)

Also known as Regulation X, RESPA is a consumer protection statute designed to eliminate kickbacks and referral fees, which result in an unnecessary increase in settlement costs to the consumer. It’s also intended to help the consumer comparison shop for settlement services. RESPA requirements govern a number of disclosures lenders are mandated to give consumers at various times throughout the lending process. Disclosures detail such things as settlement costs, lender servicing, escrow practices, and business relationships between different settlement providers. Two of these mandated disclosures are the Good Faith Estimate (GFE) and the Standard Settlement Form or HUD-1.

Good Faith Estimate (GFE)

Is a RESPA-mandated disclosure listing the estimated settlement costs associated with the loan. The lender is required to provide the GFE to consumers within 3 business days after the application is received. Typical settlement charges include appraisal fees, credit report fees, mortgage insurance premium, and interest paid in advance.

Standard Settlement Form (HUD-1 AND HUD-1A)

The HUD-1 or HUD-1A form used at closing provides the borrowers and seller with a detailed breakdown of all closing/settlement costs. It lists all payments made by the borrowers and seller even if the payments have been paid prior to closing. The HUD-1 is used when there is a borrower and seller and the HUD-1A may be used in refinance transactions when there is only a borrower. RESPA dictates which charges will be detailed on the form.

Home Mortgage Disclosure Act (HMDA)

The HMDA does not prohibit any activity, rather its goal is in its simplest form to make information available. In order to verify that financial institutions are not redlining, it requires institutions to report the geographic location, race or ethnicity, sex and income of an applicant. This information helps to identify unfair lending practices and helps the government identify private sector neighborhoods that could use its assistance.

Truth In Lending (TIL, TILA OR REG Z)

Reg Z gives consumers the ability to compare different loan offers on an equal basis, helping them become more aware of the conditions and terms between the offers. The TIL is a document the lender is required to provide the consumer within three business days of receiving the application. The TIL shows the actual cost of financing, including the annual percentage rate (APR) and the total finance charge over the life of the loan.