About the Truth in Lending Act
The United States Congress passed the Truth in Lending Act in 1968 with the goal of providing much needed protection to consumers engaged in applying for credit. It applies not only to banks and mortgage lenders but also to credit card companies and other lenders and credit issuing agencies. Simply put, the Truth in Lending Act requires lenders to make certain disclosures regarding a proposed loan, so that the borrower can make an informed decision and is fully aware of what he or she is getting into before signing the loan documents.
Truth in Lending Act: Mandatory Disclosures
The disclosures that are required to be made under the provisions of the Truth in Lending Act are straightforward, consisting of the essential information concerning the loan. In addition to the following list, the lender is required to include a disclosure concerning the borrower's right to rescind on the loan. The act's mandatory disclosures include:
The amount of the loan
The annual percentage rate
Any finance charges which may apply
The total amount that will be paid over the full term of the loan
The monthly payment amount
About Your Right of Rescission
If for any reason you decide that you no longer which to proceed with the loan, the Truth in Lending Act allows you the right to rescind within three days without any type of penalty for doing so. In the event that the lender failed to disclose any of the required terms listed above, the borrower has grounds to sue for monetary damages and attorney's fees. Additionally, failure to disclose terms causes the right of rescission for three years. By rescinding, you can recover the full amount of your down payment, as well as money you paid in the form of interest and mortgage points. These sums are set off against the principal amount of money issued to you, and you may then offer to pay off the remaining balance of the loan.
The bank must either accept or reject the offer within 20 days, after which point the right to collect the principal is waived, meaning that you will then own the home free of any lien from the bank. This provision of the Truth in Lending Act only applies to certain types of loans, and when you come to The Law Offices of Justin McMurray, P.A. for a free consultation with a Gainesville foreclosure defense attorney, we can review your situation to determine whether this is the best course of action for you. Even if it is not an option, we may still be able to help you use the fact that the bank violated the Truth in Lending Act as leverage in negotiations over a loan modification so that you can keep the home with a more affordable mortgage payment.