Laws and regulations were created to protect your rights as a borrower in your quest for home ownership. Your loan officer will be more than happy to answer any questions and explain them in greater detail if needed.

EQUAL CREDIT OPPORTUNITY ACT

This regulation was created so that all creditworthy applicants would have credit available to them without regard to race, color, religion, national origin, sex, martial status, or age; whether an applicant's income, either all or part, is derived from public assistance; or whether an applicant has exercised any good faith under the Consumer Credit Protection Act. The regulation prohibits any acts by creditors that would discriminate on the basis of any of these factors. This regulation also establishes your right to be notified by the creditor of any actions taken on your application.

HOME MORTGAGE DISCLOSURE ACT

(HMDA) Regulation is intended to provide the public with information on lending practices which can be used to help determine whether financial institutions are meeting the housing needs of their communities to attract private investments where needed; and to discourage unsound and discriminatory lending practices.

FAIR CREDIT REPORTING ACT

The purpose of this act is to ensure that credit reporting agencies use fair, accurate, and confidential reporting methods. This protects consumers against unfair and inaccurate credit status, through credit reporting methods. This protects consumers against unfair and inaccurate credit billing. If your loan is denied due to your credit status, the credit reporting agency must supply you, upon your request, with the information upon which the denial was based.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)

This act is intended to ensure that consumers throughout the country are provided with greater and more timely information on the nature of the costs associated with getting a mortgage loan. As a result of the act, federal regulations require that, within three days of your initial loan application, you will receive a disclosure of estimated settlement cost on what is known as a "Good Faith Estimate". RESPA was also created to eliminate kickbacks and referral fees that might increase settlement costs to the borrowers due to unnecessary settlement services. In addition, it is intended to regulate the amount of money borrowers are required to place in escrows for taxes and insurance.

TRUTH IN LENDING ACT-REGULATION Z

This act requires creditors to disclose information to consumers about the conditions, terms, and cost of a loan. The regulation also ensures the right of a consumer to cancel some credit transactions involving a lien on the consumer's principal residence. The intent of this act is to help you better understand loan transactions, and to assist you in comparing loans offered by different lending institutions through use of common terminology such as "annual percentage rate" (APR), and "finance charge", to name a few.

STATE LAWS

In addition to the rights provided to you under federal law, each state has its own laws which protect consumers. These laws vary from state to state. You may ask your loan officer about any specific laws and the rights that are guaranteed by those laws.

WHAT IS AN "ARM" LOAN?

ARM stands for Adjustable Rate Mortgage. If you have an ARM loan, the annual percentage rate of the loan may increase or decrease after the loan is closed. By contrast, a fixed rate loan has a rate that remains constant throughout the term of the loan. An ARM loan usually has a lower initial interest rate, making it look more attractive than a fixed rate loan. Your loan officer will explain these differences to you.

With so many different loan programs available to you, it is important to have the information you need to help you decide which mortgage loan is best for you. One type of loan you may want to consider is an ARM loan.

WHAT DETERMINES THE INTEREST RATE?

INDEXES: The rate on ARM loans are usually based on an index. An index follows the overall condition of the economy and is a measurement of the relative cost of funds at any given time. Generally, the interest rate on an ARM loan rises when an index increases and falls when an index decreases. Some examples of different indexes include: the Wall Street Journal Prime Rate, the weekly average yield on U.S. Treasury Bills, or various Cost of Funds Indexes.

Some ARM loans are not based on an index. For these loans, adjustments are left up to the lender, who adjusts the rate according to market conditions. The rates for these loans are usually comparable to loans that are tied to an index. Market forces keep them from getting out of line.

MARGINS

The interest rates on adjustable rate mortgage loans that are tied to indexes are generally determined by the addition of a margin.

Index+Margin=Interest Rate

A margin is a pre-determined amount that is added to, (or, in some cases, subtracted from) an index value in order to arrive at an interest rate. For example:

Index=4.14%, Margin=2.00% Interest Rate=6.13%

Using the above example, if at the next interest rate adjustment, the index value fell to 3.98%, then the interest rate would fall to 5.98%.

Often the interest rate is subject to one more minor adjustment known as "rounding". With rounding, the interest rate is adjusted to a pre-set increment; for example the nearest one-eight of one percent (0.125%). In the example above, after the adjustment of the interest rate (5.98%), it would be 6.00%. Now you see how a margin affects the interest rate.

Interviewing and Qualification
What are My Rights as a Borrower?
What Determines an Adjustment?
Today's Rates and Analysis.