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The Mortgage Trust & Borrowers' Rights

The federal government regulates the financial lending industry through federal consumer protection statutes. States have also enacted their own consumer protection legislation governing consumer loan transactions. Several federal laws apply to mortgage trusts and borrowers' rights against deceptive and discriminatory lending practices. These laws include the equal protection housing laws, the fair housing laws, the truth in lending regulations, and mortgage licensing laws.

  1. Overview

    • Several federal agencies administer the national consumer protection and fair housing laws. The U.S. Department of Housing and Urban Development is responsible for administering the fair housing laws. The Federal Deposit Insurance Corporation, the Department of the Treasury and the Federal Reserve oversee the financial industry. Furthermore, state laws govern the deed of trust recording requirements, and the majority of states have adopted uniform recording statutes supervised by their county register of deeds. State deed recording laws protect borrowers against property transactions that are fraudulently recorded or unrecorded.

    Truth in Lending Act

    • The federal Truth in Lending Act governs residential loan lenders and credit card companies. The act requires lenders and credit card companies to standardize and disclose their loan fees and charges to consumers in writing before they enter into loans with them. The act requires lenders to disclose their annual percentage rates to consumers who borrow money to mortgage their principal residences. Subpart E of the Truth in Lending Act applies to home mortgages used to secure consumers' principal residences. Mortgage lenders cannot extend high-cost loans to consumers who are likely to default on their loans, as determined by their assets and liabilities.

    Licensing Regulations

    • The Secure and Fair Enforcement for Mortgage Licensing (SAFE) is regulated by the Consumer Financial Protection Bureau. The SAFE Act is a nationwide effort to streamline mortgage licensing standards to help reduce loan fraud and deceptive lending practices. States enforce the licensing standards by requiring registration of all loan originators and brokers with the Nationwide Mortgage Licensing System Registry. The SAFE Act helps ensure mortgage lenders follow minimum standards for entering into mortgage deeds with consumers, including obtaining proper licensing before transacting interstate business.

    Fair Credit Laws

    • The federal Fair Housing Act and Equal Credit Opportunity Act prohibit lenders from discriminating against borrowers on the basis of their race, religion, reliance on government benefits, gender, national origin, or handicap. Lenders cannot engage in discriminatory acts against certain borrowers by denying them mortgages if they qualify for credit. Lenders who violate federal equal housing or fair credit laws face civil fines or criminal punishment.

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