Truth In Lending (TIL)
Definition of "Truth in Lending (TIL)"
The federal law that specifies the information that must be provided to borrowers on different types of loans. Also, the form used to disclose this information. Truth in Lending (TIL) is a great idea, in principle. The idea is to require lenders to provide one uniform set of price disclosures that are consistent from loan to loan and from lender to lender. Then consumers can make apples-to-apples price comparisons across loan types and across lenders. The idea has worked concerning the methodology used to calculate interest cost. Borrowers no longer have to contend with non-comparable ways to calculate interest: discount rates, add-on rates, and internal rates of return. APR: The internal rate of return used to measure interest cost on a mortgage is called the annual percentage rate, or APR. The APR on a mortgage is misleading because upfront fees are a major cost, yet only some of them are included in the APR. In addition, the APR assumes all loans run to term, when in fact most mortgages are paid in full well before term. Subordination Policy on Second Mortgages: Very few borrowers who take out a second mortgage are aware that the second mortgage lender can prevent them from refinancing their first mortgage. When the existing first mortgage is repaid, the existing second mortgage automatically becomes the first mortgage unless the second mortgage lender is willing to subordinate his claim to that of the lender providing the new mortgage into which the borrower is refinancing.
Popular Mortgage Terms
The process of determining whether a prospective borrower has the ability to repay a loan. Qualification Versus Approval: To be approved for a loan, a prospective borrower must ...
The highest rate possible under an ARM contract; same as 'lifetime cap.' It is often expressed as a specified number of percentage points above the initial interest rate. ...
Charging unwary borrowers interest rates and/or fees that are excessive relative to what the same borrowers could have found had they shopped the market. ...
A documentation requirement where the applicant's assets are not disclosed. ...
A comprehensive and time-adjusted measure of loan cost to the borrower. IC on a Mortgage: IC is what economists call an 'internal rate or return.' It takes account of all payments made by ...
Cost-of-Funds Index, one of many interest rate indexes used to determine interest rate adjustments on an adjustable rate mortgage. ...
A lenders requirements regarding how information about income and assets must be provided by the applicant and how it will be used by the lender. The following categories have evolved in ...
An ARM on which the lender has the right to change the interest rate at any time, for any reason, by any amount, subject only to a requirement that the borrower be notified in advance. The ...
On an ARM, the assumption that the value of the index to which the interest rate is tied does not change from its initial level. ...
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