There are numerous laws and regulations governing the mortgage industry. Many of these laws are aimed at protecting the interests of the borrowers. One such federal law targeting at safeguarding your interest is the Truth in Lending Act (TILA). As per this law, lenders are required to provide accurate information to the home buyers related to costs, conditions and terms of the loan. The information on the costs of taking out a loan helps you make a comparative analysis on different mortgage offers. This in turn helps you make the final decision correctly.
A brief overview on TILA
The Truth in Lending Act came into effect in 1968 with the aim of safeguarding the borrowers from the ill-motivated lenders. Since its inception, this federal law has been changed time and again, though the basic idea remained the same. The basic idea behind this law is to shield you from the predatory lenders by requiring the lenders with full and complete disclosure before making the offer.
The aim of this law is not to prevent you from borrowing money or to restrict the lenders from making profits from lending business. The TILA does not talk anything about the rate of interest that can be charged by the lenders. However, it mandates that the lenders should vividly disclose all the information related to the costs, terms and conditions of the loan. It ensures that there no information gap to the borrowers in regard to the loan.
The disclosure document will also reveal some additional information. If any kind of prepayment penalty is associated with a loan, that should be revealed. If the loan that you are taking out is of adjustable rate type, then the lender must disclose information on maximum interest rate increases. The periodic adjustment dates of interest rates have also to be disclosed.
As a responsible borrower, you should also check the disclosure document very carefully. You need to ensure that you have clearly understood all the terms and conditions related to the loan. You also need to check out whether or not the rate of interest given in the disclosure document is same as the rate agreed upon between you and the lender. Anyways, even after reading the document very carefully, if any doubt comes to your mind, you need to clarify your doubts.
Enforcement of TILA
The Federal Trade Commission (FTC) is entrusted to look after whether or not TILA is being enforced properly. In case any particular lender fails to comply with the disclosure requirements, then legal action can be taken against that lender. In case a lender is found guilty, then he/she has to be responsible for paying fees to the borrower in fighting the case as well as the fees for the damages made to the borrower.