What is the Truth in Lending Act (TILA) and why is it important in mortgage lending?

• A. The Truth in Lending Act requires clear, conspicuous disclosure of credit terms, including the APR.
• B. TILA sets appraisal standards for residential properties.
• C. TILA governs settlement-cost disclosures and anti-kickback rules.
• D. TILA prohibits discrimination in lending.

Answer: (A)

TILA is about making the true cost of borrowing clear to consumers. It requires lenders to present credit terms in a way that is clear and easy to understand, with the annual percentage rate included. The APR combines the interest rate and certain fees so borrowers can compare offers on an apples-to-apples basis rather than chasing low teaser rates and missing other costs. This transparency helps borrowers assess the real price of a mortgage and make informed decisions.

This focus on clear, standardized disclosures is what makes the first option the best fit. Other choices mix in roles that aren’t TILA’s responsibility—appraisal standards come from separate processes, settlement-cost disclosures and anti-kickback rules come under RESPA, and prohibiting lending discrimination is handled by ECOA and related fair-lending laws.