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Ok...I said we'd keep it basic...so to honor my commitment to the basics how 'bout if wes covers a minute topic...let's call the topic...FEDERAL LAW...let's just do it and at least we'll have it out of the way.

Federal Law

Local mortgage lenders and brokers are not just regulated by Florida State Law. In fact, there are many federal laws the regulate mortgage transactions. Here's a brief summary of some of those laws:

The Truth in Lending Act (Regulation Z) - In 1968, The Consumer Protection Act was put in effect to require all lenders, including mortgage lenders, to disclose to borrowers exactly how much obtaining credit was going to cost them. The law is designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs. Under the regulation the lender is required to make certain disclosures regarding the extension of credit to the borrower:

Annual Percentage Rate (APR) - APR is the actual cost in the form of an annual interest rate the mortgage borrower will pay after all of the closing costs and other charges are taken into consideration. This cost is calculated by including rate, points, MIP, processing fees, and other costs associated with the loan.

APR must be computed and disclosed to the borrower on the Truth In Lending statement and calculated to the nearest 1/8 of a percent.

Finance Charges - Finance Charges must also be reported to you on the Truth In Lending (TIL) statement; this informations is obtained from the Good Faith Estimate provided to you within 3 business days after written application.

The lender is required to give you the TIL statement within 3 business days of application. The information is not always certain at this time and the lender can indicate the items listed on the statement are estimates (BE CAREFUL HERE COULD BE A...T R I P W I R E)... here's an example of one:

Let's say you want to refinance your existing mortgage. You owe an estimated $100,000 on your property. Your existing mortgage is a 30-year fixed at a 6.50 rate. Your current monthly payment is $632 per month.

So, you and a lender agree on a new mortgage of $104,500 that nets you $1,800 cash out (nice vacation) and a new rate of 5.75% and your new monthly payment is $610.

So far so good, but here's where people get "scouped" everyday. Your payoff comes in at $98,950 ($1,050) less than anticipated...at the closing there's a new Good Faith Estimate that you're asked to sign, and for some strange reason it has exactly $1,050 more in fees than your initial offering. AN ATTEMPT IS BEING MADE TO "SCOUP" YOUR REDUCED PAYOFF.

Anytime there are "redisclosures" at the closing...there should be MAJOR RED FLAGS.

If the actual APR is different by more than a small amount, the lender must give a corrected TIL statement no later than at settlement.

Regulation Z says the APR must match the lenders estimate, if it is off by as little as 1/8% it must be rewritten. The TIL statement also discloses the schedule of payments, late payment charges, and whether or not you will have to pay a pre-payment penalty for paying your loan off early.

According to the Federal Trade Commission (FTC) you may be signing on for a bad loan if a lender:

• Encourages you to falsify your application information to get the loan.
• Urges you to borrow more than you need.
• Pushes you to accept payment terms you can't realistically meet.
• Fails to give you the required disclosures (APR, rescission rights).
• Asks you to sign blank forms.
• Denies you copies of documents you signed.
• Shows up at closing with a totally different loan product than you agreed on .

Good news!! Federal Reserve Board Chairman, Ben Bernanke, cares about you and your mortgage and if anyone misrepresents we'll get Bernanke on 'em. That keeps all the "good ole boys" boy scouts, and we want loyalty and integrity...(it's a must).

Jim Moore is a trusted Florida mortgage expert who wrote A Wholesale Guide to Florida Mortgage. If you wish to contact Jim call
1-305-609-4144, or email:

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