VIOLATIONS OF FEDERAL LAW (TILA, RESPA)
The Truth in Lending Act (TILA) is a Federal Law intended to ensure that consumers receive accurate information when they enter into credit transactions. TILA covers most consumer credit loans, including mortgages, credit cards, and home equity loans. The idea is to standardize the disclosures given to consumers. There are two main types of TILA violations that can provide relief to borrowers when a creditor does not adhere to the law: violations for damages and violations that allow rescission. Some examples of violations are the improper disclosure of the amount financed, finance charge, payment schedule, total of payments, annual percentage rate, and security interest disclosures. Under TILA, a creditor can be strictly liable for any violations, meaning that the creditor’s intent is not relevant. Rescinding means the borrower can void the loan as if it was never made.
The Real Estate Settlement Procedures Act (RESPA) was enacted to protect consumers. It requires mortgage lenders, servicers, and brokers to provide borrowers with disclosures regarding the purchase of real estate. One useful provision allows borrowers to make a “Qualified Written Request.” This is a letter to the mortgage servicer that requests information pertaining to the mortgage loan or requests that the servicer correct an error. Once the servicer receives a QWR, the servicer must acknowledge receipt within 5 days and within 30 days must correct the account and provide the borrower with information. The statute of limitations for violations is three years. 12 U.S.C. § 2614. RESPA does not prohibit the lender from initiating or moving forward with a foreclosure. While a QWR is pending, the servicer may still pursue foreclosure if there is a mortgage loan default. 24 C.F.R. § 3500.21[e][ii]. A QWR can be a powerful tool for a borrower facing foreclosure, because it forces the servicer to provide information about the account to the borrower.