You are going to take the biggest financial decision of your life. It is important that you are aware of the laws and regulations that are there to protect you from mortgage scams, frauds and discrimination based on race, color, religion, national origin, age, sex, marital status, or disability.
Laws and Acts by Federal Government
The following are some of the federal laws protecting the rights of the borrowers.
Fair Credit Reporting Act (FCRA)
FCRA was enacted in 1971 and revised in 1997 to ensure that credit bureaus are fair and accurate when providing information to authorized businesses. Consumers are provided certain rights when dealing with such consumer reporting agencies, which must maintain accurate credit histories and protect the individuals’ privacy rights.
Fair Housing Act
This federal law prohibits the discrimination on the basis of race, color, national origin, religion, sex, familial status, or disability in all kinds of real estate transactions, which include mortgage, home improvement and other secured loans. The law, which was enacted in 1968, is regulated and enforced by the Department of Housing and Urban Development. The lender is also prohibited from discriminating by changing mortgage terms, altering appraisals and declining information requested by the consumers.
Equal Credit Opportunity Act (ECOA)
ECOA is a federal law that protects loan applicants from discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
Home Mortgage Disclosure Act (HMDA)
HMDA, also known as Regulation C, enables disclosure of mortgage lending application activity to regulators as well as to the public. The report is generated by geographic designation and made accessible to the public.
Real Estate Settlement Procedures Act (RESPA)
RESPA is a federal law that makes it mandatory for the lenders to disclose settlement costs at the time of application. Besides, it also prohibits them to charge certain types of referral and other fees and helps set rules for escrow accounts. Among other things, RESPA also gives you the right of information when your servicer changes.
Enacted in 1968, the Truth-in-Lending Act requires a lender to disclose all details of a mortgage loan, including the cost and terms of the credit, such as annual percentage rate (APR), interest rate, the principal amount approved, any finance charges and the total amount that a borrower will pay over the life of the loan.
Mortgage Borrowers’ Rights
The aforementioned laws are just there to offer borrowers certain rights when they decide to become homeowners. These rights help borrowers protect themselves from predatory lending practices.
The laws allow you to seek information on
- Total cost of your loan including the interest rate, points and other fees
- The non-refundable fees in case you don’t want to continue with the loan agreement
- How the mortgage broker will be paid and what he/she can do for you
- The charges and loan terms that are beyond your comprehension
- Why your loan was turned down
The laws also allow you to
- Shop and compare mortgage loans
- Receive a Good Faith Estimate and a Truth-in-Lending Disclosure Statement within three days of application
- Report if you are discriminated on the basis of your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance
- Ask for the HUD settlement cost booklet.
For more information about federal mortgage laws and borrowers’ rights, you should contact a HUD counseling agency or call (800) 569-4287.