Home - Mortgage Loans | Personal Loans | Bad Debt Loans | Foreclosure Loans
Apply for a Loan | Best Auto Loans | Best Bad Credit Auto Loans | Best Bad Credit Loans | Best Bill Consolidation Loans | Best Cash Advance Loans | Best Credit Cards | Best Credit Repair Tips | Best Debt Consolidation Loans | Best Free Credit Reporting Tips | Best Home Equity Loans | Best Mortgage Loans | Best Pay Day Loans | Best Personal Loans | Best Products on the Internet | Best Unsecured Loans
Great Financial Advice
Apply for a Loan
Latest Financial News
Rate Lock Advisory
Best Products
Join Our Mailing List
Contact Us
Loan Articles Index
Auto Loans
Bad Credit Auto Loans
Bad Credit Loans
Bill Consolidation Loans
Cash Advance Loans
Credit Cards
Credit Repair Tips
Debt Consolidation Loans
Debt Reduction Loans
Foreclosure Loans
Free Credit Reporting Tips
High Risk Loans
Home Equity Loans
Home Loans
Lawsuit Loans
Mortgage Loans
Pay Day Loans
Personal Loans
Products on the Internet
Real Estate Services
UK loans
Unsecured Loans
Loan Article Index
Loan Articles A-G
Loan Articles H-Q
Loan Articles R-Z
Mortgage Calculators
Mortgage Calculator
Mortgage Amortization Calculator
Rent vs. Buy Calculator
How Much Can I Afford Calculator
Auto Payment Calculator
Click here to Sign up for Email and Newsletter

 

redhotloantips fat loss


Home Equity Loans - Section 32 Mortgages

Written by: Federal Trade Commission

If you're refinancing your mortgage or applying for a home equity installment loan, you should know about the "Home Ownership and Equity Protection Act of 1994." The law addresses certain deceptive and unfair practices in home equity lending. It amends the Truth in Lending Act (TILA) and establishes requirements for certain loans with high-rates and/or high-fees.

The rules for these loans are contained in Section 32 of Regulation Z, which implements the TILA, so the loans also are called "Section 32 Mortgages." Here's what loans are covered, the law's disclosure requirements, prohibited features, and actions you can take against a lender who is violating the law.

What Loans Are Covered?

A loan is covered by the law if it meets the following tests:

- The annual percentage rate (APR) exceeds by more than 10 percentage points the rates on Treasury securities of comparable maturity; (or)

- The total fees and points payable by the consumer at or before closing exceed the larger of $451 or 8 percent of the total loan amount. (The $451 figure is for 2000. This amount is adjusted annually by the Federal Reserve Board, based on changes in the Consumer Price Index.) The rules primarily affect refinancing and home equity installment loans that also meet the definition of a high-rate or high-fee loan. The rules do not cover loans to purchase or initially construct your home, reverse mortgages, or home equity lines of credit (similar to revolving credit accounts).

What Disclosures Are Required?

If your loan meets the above tests, you must receive several disclosures at least three business days before the loan is finalized:

- The lender must give you a written notice stating that the loan need not be completed, even though you've signed the loan application and received the required disclosures. You have three business days to decide whether to sign the loan agreement after you receive the special Section 32 disclosures.

- The notice must warn you that because the lender will have a mortgage on your home, you could lose the residence and any money put into it, if you fail to make payments.

The lender must disclose the APR and the regular payment amount (including any balloon payment where the law permits balloon payments, discussed below) for high-rate, high-fee loans. For variable rate loans, the lender must disclose that the rate and monthly payment may increase and state the amount of the maximum monthly payment. These disclosures are in addition to the other TILA disclosures that you must receive no later than closing of the loan.

What Practices Are Prohibited?

The following features are banned from high-rate, high-fee loans:

- All balloon-payments - where the regular payments do not fully pay off the principal balance and a lump sum payment of more than twice the amount of the regular payments is required - for loans with less than five-year terms. There is an exception for bridge loans of less than one year used by consumers to buy or build a home: in that situation, balloon payments are not prohibited.

- Negative amortization, which involves smaller monthly payments that do not fully pay off the loan and that cause an increase in your total principal debt.

- Default interest rates higher than pre-default rates.

- Rebates of interest upon default calculated by any method less favorable than the actuarial method.

- A repayment schedule that consolidates more than two periodic payments that are to be paid in advance from the proceeds of the loan.

- Most prepayment penalties, including refunds of unearned interest calculated by any method less favorable than the actuarial method. The exception is if: the lender verifies that your total monthly debt (including the mortgage) is 50% or less of your monthly income. You get the money to prepay the loan from a source other than the lender or an affiliate lender; and the lender exercises the penalty clause during the first five years following execution of the mortgage.

Creditors also are prohibited from engaging in a pattern or practice of lending based on the collateral value of your property without regard to your ability to repay the loan. In addition, proceeds for home improvement loans must be disbursed either directly to you, jointly to you and the home improvement contractor, or, in some instances, to the escrow agent.

How are Compliance Violations Handled?

You may have the right to sue a lender for violations of these new requirements. In a successful suit, you may be able to recover statutory and actual damages, court costs, and attorney's fees.

In addition, a violation of the new high-rate, high-fee requirements of the TILA may enable you to rescind (or cancel) the loan for up to three years.

Where to Go for More Information?

The FTC publishes a series of credit and home-related publications. For a free copy of Best Sellers, a complete list of FTC publications, contact: Consumer Response Center, Federal Trade Commission, Washington, DC 20580; toll-free: 1-877-FTC-HELP (382-4357). TDD: 202-326-2502. You also can visit us at www.ftc.gov.

This article is public domain.

About the author:

Read more articles like this at Home Equity Credit Line... articles and resources to help you get the best home equity line of credit or loan, and avoid mistakes and scams that could cost you your home.


Other Related Articles:

Bridging Loan Basics
A Bridging Loan is a short-term loan used as a way to provide funding for the purchase of a new property while the borrower awaits the sale of an existing property. Unless all the stars are in perfect alignment, itís tricky to coordinate the...read more

Finding the Best Electronic Loans
Sometimes it seems that you can't find the time to get to the bank and apply for a loan... maybe your schedule is packed tight, or maybe you work odd hours or long shifts and can't get away from work to head to the bank. There may be other...read more

Self Employed Mortgage Loan Ė Getting a Mortgage When Youíre Self Employed
Being self employed has many benefits. When you are self-employed, you can write off all of your deductions on your taxes. You have the potential to make more income than someone who is employed by someone else. You have the freedom to be your own...read more


Return to Home

468x60

Best Auto Loans, Best Bad Credit Auto Loans, Best Bad Credit Loans, Best Bill Consolidation Loans, Best Cash Advance Loans, Best Credit Cards, Best Credit Repair Tips, Best Debt Consolidation Loans, Best Debt Reduction Loans, Best Foreclosure Loans, Best Free Credit Reporting Tips, Best High Risk Loans, Best Home Equity Loans, Best Home Loans, Best Lawsuit Loans, Best Mortgage Loans, Best Pay Day Loans, Best Personal Loans, Best Products on the Internet, Best Real Estate Services, Best UK loans, Best Unsecured Loans
Subscribe to Mailing List | Private Policy | Unsubscribe | Site Map