There are a variety of mortgage laws which aim at protecting the interest of the consumers. These laws and regulations are meant for protecting the gullible consumers from irresponsible and unethical lending practices. There are some laws which are applicable for the entire country and many states have their own laws also. Anyways, here we mainly discuss about some important laws which seek to safeguard the interest of the borrowers.
1. Real Estate Settlement Procedures Act (RESPA)
The original RESPA was passed by the Congress in the year 1974. Its latest version came into effect in the year 2010. The aim of this act is to shield the potential borrowers and to turn them into more intelligent borrowers. As per the RESPA, lenders are required to offer more information to the prospective consumers at different points of time in the loan settlement process. Lenders are required to provide disclosure at the time of loan application, before closing, at the time of closing and even after closing.
2. Equal Credit Opportunity Act (ECOA)
ECOA came into effect in 1975. This aims at offering equal opportunity to all the legal borrowers in applying for a mortgage loan. As per this act, borrowers can't be discriminated for factors which are not at all related to their creditworthiness. Borrowers can't be discriminated on the basis of their marital status, sex, religious background, racial background etc. Only relevant financial information such as income, credit score, current debt load etc should be taken into consideration while offering a mortgage loan.
3. Truth in Lending Act (TILA)
TILA was enacted in 1968. This is a Federal law which requires the lenders to disclose certain information on the costs of the loan in writing. Prior to extending credit to the borrowers, lenders must disclose important information to the borrowers such as annual percentage rate (APR) of the loan, total costs to the borrowers, term of the loan etc. Different states have their own version of TILA, but the crux of this act, i.e., to safeguard the interest of the consumers in credit transaction, remains same all over the country.
4. Fair Debt Collection Practices Act (FDCPA)
This Federal law was introduced in 1977. The FDCPA law limits the actions and the behaviors of the debt collectors who collect the debt for other parties. This restricts the debt collectors from engaging in deceptive, unfair and abusive debt collection practices. This also prohibits harassment to the borrowers, over-charging and disclosing delicate consumer's debt information to other parties.
5. Fair Housing Act
This act was introduced in 1968. As per this act, there should not be any discrimination in housing transactions (rental as well as purchase) on the basis of handicapcy, familial status (with or without children), national origin, sex, color or race.
6. Home Mortgage Disclosure Act (HMDA)
HMDA came into force in 1975. As per this act, lenders should mandatorily disclose public loan data of both the approved as well as the denied loans.
These are major laws which seek to safeguard the interest of the consumers and help them avoid irresponsible lenders.