Which act requires lenders to clearly communicate the annual percentage rate (APR) to borrowers?

Prepare with Real Estate Finance Exam. Study with flashcards and multiple-choice questions. Each question has hints and explanations. Get ready for your exam now!

The Truth in Lending Act (TILA) is the legislation that mandates lenders to provide clear and accurate information regarding the annual percentage rate (APR) to borrowers. The APR is crucial because it represents the cost of borrowing on a loan expressed as a yearly rate, including both the interest rate and any associated fees, thus providing borrowers with a comprehensive understanding of the actual cost of their loan over a year.

TILA aims to promote informed use of consumer credit by requiring disclosures of its terms and costs. By making sure that the APR is clearly communicated, TILA helps borrowers compare different loan offers and make more informed decisions, thereby enhancing consumer protection in the lending process.

Other acts, such as RESPA (Real Estate Settlement Procedures Act), focus on different aspects of real estate transactions, primarily concerning the transparency of settlement costs and services. FHA and VA Loans are programs designed to assist specific groups of borrowers, but they do not specifically require APR disclosures like TILA does. Therefore, TILA is the correct choice as it directly relates to the clear communication of annual percentage rates.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy