Finance
Regulation Z under TILA applies to consumer credit transactions and specifically requires:
AAll businesses to report credit transactions to the Federal Reserve
BLenders to disclose the Annual Percentage Rate (APR) and key loan terms to borrowers✓ Correct
CMortgage companies to maintain a 20% reserve against loan defaults
DInterest rates to remain fixed for the life of residential loans
Explanation
Regulation Z implements the Truth-in-Lending Act (TILA) and requires lenders to provide clear disclosure of credit terms, including the APR, finance charges, and total payments. The purpose is to allow consumers to compare credit offers.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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