Housing Counselor Certification (HUD) Practice Exam

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Under which regulation must lenders provide clear explanations of the costs associated with a mortgage?

Truth in Lending Act
Homeowner’s Protection Act
Equal Credit Opportunity Act
National Housing Act

The correct answer is: Truth in Lending Act

The Truth in Lending Act (TILA) is designed to promote informed use of consumer credit by requiring disclosures about its terms and costs. Under TILA, lenders must provide borrowers with clear and concise information regarding the costs associated with a mortgage, including the interest rate, annual percentage rate (APR), and other fees or charges that may arise during the life of the loan. This regulation ensures that consumers can compare mortgage offers and understand the financial implications of their borrowing decisions. The Homeowner’s Protection Act primarily focuses on private mortgage insurance (PMI) and the circumstances under which it can be canceled, rather than providing broad disclosures of mortgage costs. The Equal Credit Opportunity Act prohibits discrimination in credit transactions, ensuring fair access to credit but does not specifically mandate transparency in cost disclosures. The National Housing Act encompasses various housing-related programs but does not specifically address the requirement for lenders to disclose mortgage costs as outlined in TILA.