This material is intended to make you aware of these laws/regulations, but should not be used as the basis for any specific action without obtaining the advice of your own knowledgeable and experienced counsel.
Fair Housing Act – The Fair Housing Act prohibits discrimination in the sale, rental and financing of residential housing in order to protect consumers against unfair activities that would deny them housing. It specifically prohibits discrimination based on race, color, national origin, religion, sex, handicap (disability) or familial status.
Fair Credit Reporting Act (FCRA) – referred to as and pronounced, fek’ - ra. Because virtually all mortgage lenders use credit reports to evaluate a borrower’s credit history, they must adhere to the Fair Credit Reporting Act. This act is designed to promote accuracy, fairness and privacy of information in the files of consumer reporting agencies. Among other things, FCRA limits to whom a credit reporting agency can furnish credit reports, and it 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 a credit-reporting agency and dispute any information believed to be inaccurate.
Equal Credit Opportunity Act (ECOA), and Regulation B – referred to as and pronounced, ee - ko’ - ah. The Equal Credit Opportunity Act prevents financial institutions and other lenders from unlawfully discriminating in the evaluation of an applicant’s creditworthiness. Among other things, ECOA requires lenders and other creditors to make credit equally available without discrimination based on sex, race, religion, national origin, age (with some exceptions), marital status or receipt of public assistance. In short, its purpose is to require financial institutions to make credit equally available to all creditworthy applicants.
Homeowners Protection Act (HPA) of 1998 – The HPA establishes rules for automatic termination and borrower cancellation of private mortgage insurance on home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999, for the purchase, initial construction or refinance of a single-family home. The protections do not apply to government-insured FHA or VA loans or to loans with lender-paid private mortgage insurance. The HPA protects homeowners from continuing to pay mortgage insurance once a mortgage’s principal balance reaches 78% of the original value of the property. MI is automatically cancelled at that point.
The Gramm-Leach Bliley Act (GLB) – GLB is designed to protect the privacy of certain nonpublic, consumer information. Under GLB, a lender is responsible for setting up controls to protect the privacy of borrower information, from application through archiving.
Real Estate Settlement Procedures Act (RESPA), and Regulation X – referred to as and pronounced, res’ - pa. This act is a consumer-protection statute designed to eliminate kickbacks and referral fees that result in an unnecessary increase in settlement costs to the consumer. It’s also intended to help consumers comparison-shop for settlement services. RESPA also requires a number of borrower disclosures, which lenders are mandated to give consumers at various points in time throughout the lending process. These disclosures provide details about settlement costs, lender servicing, escrow practices and business relationships between different settlement providers (for example, between loan originators and real estate agents). These mandated disclosures include the Good Faith Estimate (GFE) and the Standardized Settlement Statement (HUD-1 or HUD-1A).
In addition to the GFE and HUD-1, examples of other documents and disclosures required by RESPA include:
Home Mortgage Disclosure Act (HMDA) and Regulation C – referred to as and pronounced, hum’ - da.
Unlike the Fair Housing Act and ECOA, HMDA does not prohibit housing discrimination. Rather, it requires lending institutions to report certain data regarding mortgage loan approvals and denials, such as the geographic location of the secured property; the race, ethnicity, and sex of the loan applicant; and whether the loan was granted. The lending data reported under HMDA is publicly available and can be used to determine whether financial institutions are (1) serving the housing needs of their communities and (2) engaged in possible discriminatory lending patterns (i.e., redlining, the illegal act of denying credit to persons residing in specific geographic areas or using discriminatory lending practices based on location).
This information helps the government identify neighborhoods that could use its assistance. It’s important to remember that while HMDA is used to monitor unfair lending practices, it does not encourage unsound, risky lending.
USA PATRIOT Act (Patriot Act) – To help the government fight the funding of terrorism and money-laundering activities, the USA PATRIOT Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001) requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.
Truth In Lending Act (TIL or TILA) and Regulation Z – The Truth In Lending Act, and Regulation Z promulgated under the Act, require that certain essential credit terms be disclosed in a standardized and meaningful way so that consumers can compare different loan offers on an equal basis, helping them become more aware of the offers’ differing terms and conditions. Lenders are required to provide a standardized Truth in Lending Disclosure Statement to a mortgage loan applicant within three business days of receiving a mortgage application. Among other things, the disclosure must specify: