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Home Loans and the Consumer Credit Protection Act

As defined by ‘Regulation Z’ or ‘The Truth in Lending Act,’ American mortgage consumers guaranteed the right to obtain detailed information about their mortgage loan. The regulation or act ensures a consumer the best financing ability to make the right loan financing decision. Shopping for the best mortgages exceeds comparing loan interest rates. (The Consumer Credit Protection Act is comprised of ‘Regulation Z’).

Substantially pertinent information that must be clearly defined in ‘The Truth in Lending’ (TIL) disclosure form which includes data pertaining to the Finance Charge and Annual Percentage Rates (APR). The two items must be emphasized in the disclosure statement and set apart from the other information on ‘The Truth in Lending.’

As delineated in the Regulation, the ‘Finance Charge’ is a dollar amount of the fee of consumer credit. It encompasses any cost payable directly or indirectly by the consumer. The finance charge is imposed by the creditor as a direct or indirect an incident to all terms and conditions in extending credit to the consumer. For instance, the costs contained in the ‘Finance Charge’ include the following:

• Interest

• Points

• Loans fees

• Mortgage insurance

• Premiums paid for: credit life, health, accident, health, or loss-of-income insurance, (if it is a requirement of the mortgage loan transaction).

Generally, the fees that are NOT included in the finance charge are those atypically charged in a similar cash transaction. The cost exclusions include the following:

• Credit reporting fees

• Appraisal

• Title examination

• Title insurance.

Application fees are not normally included if they are applicable to all parties, despite whether credit is approved or denied. If application fees are contingent upon credit extension, the cost is calculated in the Finance Charge.

The Annual Percentage Rate (APR) is the fee of credit conveyed as a yearly rate. It is based upon the Finance Charge, as well. The APR is assessed by utilizing a complicated mathematical formula with the United States method or actuarial method. The Annual Percentage Rate (APR) is different from the stipulated note rate. Normally, it is higher is due to the combination of the stated interest rate of the loan and the finance charges required by the lender defined above. In a nutshell, the APR is the authentic interest rate of the mortgage loan.