A borrower involved in a loan is protected from many things in such a transaction. This can deal with protection from wrongdoing or abuse by the lender, or discrimination in granting a loan. Regardless, certain laws and regulations exist to give the borrower a form of security over the loan they are acquiring, which will help to avoid any issues down the road. The legal documents that contain information regarding a mortgage, security deed, etc., are all meant to protect both parties.
One way they can benefit the borrower is by preventing any changes in the information of such a document where they could be unfair to the borrower. For example, if there is a fixed interest rate on a mortgage for a certain period of time, and within that period of time, the lender decides to change it before it is eligible, he can be held liable under the law. The details dealing with loans must all be documented for the purpose of having a clear understanding over their entitlements, and how they pertain to each party as well as spanning what amount of time.
These are the obvious ways as to how a borrower may be protected from wrongdoing by a lender, but there are also certain laws and acts that affect them as well. Four specific laws imposed by the federal government to protect and inform the borrowers of their rights are the Fair Credit Reporting Act, Real Estate Settlement Procedures Act, Equal Opportunity Act, and Truth in Lending Act. The Fair Credit Reporting Act relates to the right a borrower has to view and be informed of their credit records, the same way the institution they are applying for credit from may as well.
For example, if a borrower looking to take out a loan applies for one at the bank, the bank would obtain a credit report for that person. This act allows the borrower to acquire the same report to make sure that the bank does not make any false statements regarding the report, especially in the event the loan is denied. There is also the law protecting the lender from hiding any fees that may be associated with the closing of a loan or mortgage. These, and all fees, must be disclosed completely to the borrower under the Real Estate Settlement Procedures. Some of the costs may be estimated due to the inability to have knowledge of the exact closing costs, but the estimate will give a general idea to the borrower.
The Equal Opportunity Act disallows any discrimination of the borrower in terms of lending. This prevents the lender from denying a person a loan, credit, etc., due to their sex, religion, creed, race, origin, age, or other status. This act is of high importance especially with the number of discrimination cases that have been brought against employers, retailers, and institutions in the past few years.
Finally, the Truth In Lending Act provides the borrower with a full disclosure of costs related to the loan as well as interest rates and the arrangements made for the loan, credit, etc. This can deal with stating whether or not the annual percentage rate can change at a given point, or whether it is to remain the same, as well as how and when payments are made. This is to prevent any tampering from the lender that could place the borrower’s credit in jeopardy.