While granting particular consumer mortgage loans, some lenders engage in unscrupulous lending practices. This is known as predatory lending, which brings harm to legitimate lenders and consumers and adds to high foreclosure rates. Such practices can be prevented by applying several kinds of consumer protection laws.
If, in any case, you are planning for refinancing your mortgage loan or even thinking of applying for home equity installment loan, you must have a clear knowledge of Home Ownership and Equity Protection Act (HOEPA). This is so because lenders offering mortgage refinancing must comply with the act. HOEPA covers unfair and deceptive practices involved in taking home equity loans.
The “Truth in Lending Act” was modified by the Home Ownership and Equity Protection Act. Certain loans are covered by this ruling. However, they must meet some particular requirements, such as if the loan is a first lien, i.e. the original mortgage put on the property. Here the Annual Percentage Rate must exceed beyond 8 % points. The percentage of the rates is compared with Treasury securities of comparable maturity. If the loan is a second mortgage, then the APR must go beyond 10 %.
In insurance, the credit insurance premiums that are laid down in relation to credit dealings are in turn held as the fees. The rules normally involve home equity installment loans as well as refinancing. Again, these loans must fulfill the requirements of high-rate and high-fee loans. HOEPA, however, does not address loans taken to purchase or construct your home, home equity lines of credit, or even reverse mortgages.
The lender is required to make some disclosures to the borrower while it is submitted to HOEPA. The disclosures must be made within no less than three days before the finalization of the loan. The borrower must receive a written notice from the lender stating that there is no need to complete the loan. Such a notice can even be sent if the loan application is signed and the required disclosures have been given. Along with that, the notice must have other announcements too. It must reveal the annual percentage rate of interest of the loan, the sum to be paid on regular basis and the loan amount.
The notice should also inform the borrower that he might lose the rights on his home in case if the mortgage payments are not made. This is because the lender has a mortgage on your home. Once the consumer receives the notice, he must reply mentioning the date of delivery. He gets three (business) days time if he decides to cancel the loan.
Violation of the Home Ownership and Equity Protection Act (HOEPA) by a lender gives the borrower ample rights to sue him. The issues may include actual as well as statutory damages, costs of the suit and the fees given to the lawyer. Apart from this, the borrower has the right to cancel the loan as well. If the violation is related to high-rate and high-fee conditions of TILA, you have the right to cancel the loan to a period of three years.
In several recent lawsuits, lenders have been involved in huge monetary settlements. The penalty related to the violation of lending regulations can indeed be severe. People in the lending business must have a good knowledge of this and remember to stick to them. Failure to comply with these regulations can lead to great and expensive trouble. Now, if a lender plans to eliminate risks of falling into such trouble, he/she must consult legal advisers. A good knowledge regarding the regulations, the laws and proper lending practices can keep consumers away from such trouble.