National Real Estate Practice Exam

Which of the following is a requirement of the Federal Truth in Lending Law?

1. Requires a lender to estimate the borrower's loan closing costs

2. Regulates advertising regarding mortgage terms

3. Prevents brokers from using phrases like "FHA financing available"

4. Dictates mortgage applications must be on government forms

The correct answer is: Regulates advertising regarding mortgage terms

The Federal Truth in Lending Law, also known as TILA, was enacted to promote informed use of consumer credit by requiring disclosures about its terms and costs. One of the law's significant requirements is to regulate advertising related to mortgage terms to ensure that borrowers are not misled by promotional materials. This includes stipulations about how lenders must present meaningful information regarding the credit terms to potential borrowers, such as interest rates, terms of repayment, and other essential conditions. This regulation aims to provide clarity and transparency in advertising, allowing consumers to make better-informed choices when considering credit and financing options. Therefore, the correct answer highlights this vital aspect of the law concerning advertising practices for loans, reinforcing the need for honesty and transparency in the lending industry. The other options, while related to aspects of real estate transactions, do not accurately reflect the core requirements set forth by TILA. For example, estimating closing costs is a requirement under different regulations but not specifically tied to TILA. Similarly, while misleading advertising phrases are discouraged, TILA does not explicitly prevent the use of terms like "FHA financing available." Mortgage applications can follow various formats and are not mandated to be on government forms under this law.