TILA — Truth in Lending Act (Regulation Z)
Master TILA and Regulation Z for the NMLS exam. Disclosure timelines, right of rescission, advertising rules, HPML/HOEPA thresholds, and TRID integration.
Key TILA Provisions for the MLO Exam
Loan Estimate (LE)
Must be provided within 3 business days of receiving a loan application (6 data points: name, income, SSN, property address, estimated value, loan amount). The LE replaced the old Good Faith Estimate and initial Truth-in-Lending disclosure under TRID.
Closing Disclosure (CD)
Must be provided at least 3 business days before consummation (closing). A new 3-day waiting period is triggered if: (1) APR increases by more than 1/8% for fixed or 1/4% for ARM, (2) loan product changes, or (3) a prepayment penalty is added.
Right of Rescission
3 business days to cancel a refinance on a primary residence. Does NOT apply to purchase money mortgages. The rescission period begins after the later of closing, delivery of TIL disclosures, or delivery of rescission notice. Maximum rescission period: 3 years if disclosures were never provided.
APR Disclosure
The Annual Percentage Rate (APR) must be disclosed and represents the true cost of credit including interest and certain fees. APR allows consumers to compare loan offers from different lenders on an equal basis.
Advertising Trigger Terms
If an ad includes specific credit terms (trigger terms), full disclosures are required. Trigger terms include: payment amount, number of payments, finance charge amount, or down payment amount. Simply stating the APR is NOT a trigger term.
Higher-Priced Mortgage Loan (HPML)
A mortgage where the APR exceeds the Average Prime Offer Rate (APOR) by 1.5% for first liens or 3.5% for subordinate liens. HPMLs require: an appraisal by a licensed appraiser, escrow accounts for taxes and insurance for at least 5 years, and additional consumer protections.
High-Cost Mortgage (HOEPA)
APR exceeds APOR by 6.5% (first lien) or 8.5% (subordinate lien), OR points/fees exceed 5% of loan amount (or $1,000 for loans under $20,000). High-cost mortgages trigger additional requirements including pre-loan counseling and restrictions on loan terms.
Sample TILA Exam Questions
A borrower applies for a refinance on their primary residence and closes on Monday. When does the right of rescission period expire?
A) Wednesday at midnight
B) Thursday at midnight
C) Friday at midnight
D) The following Monday at midnight
Correct: B — The 3-business-day right of rescission starts after closing. Day 1 = Tuesday, Day 2 = Wednesday, Day 3 = Thursday. The rescission period expires at midnight on Thursday. Sundays and federal holidays are not counted as business days for rescission purposes.
Which of the following is a "trigger term" in a mortgage advertisement under Regulation Z?
A) "Low rates available"
B) "No money down"
C) "Apply today"
D) "Competitive APR"
Correct: B — "No money down" is a trigger term because it specifies a down payment amount (zero). When any trigger term is used, the ad must include: APR, terms of repayment, and all other required disclosures. General terms like "low rates" or "competitive APR" are not triggers.