• Learn some of the laws that protect borrowers in refinance situations.home sweet home image by David Dorner from Fotolia.com
  
  When a homeowner seeks a mortgage refinance, the consumer mortgage laws protect the consumer from predatory lending practices. The mortgage laws help to ensure that mortgage refinance borrowers are making an educated decision to refinance their mortgage and that the homeowners fully understand what the mortgage refinance entails. The federal government has established these mortgage laws and has practices in place to ensure that mortgage lenders are abiding by these laws.
  
  

Truth in Lending Act

• The Truth in Lending Act has several components including full disclosure on the terms and conditions of the refinance mortgage to the consumer. The act requires the lender to disclose the mortgage interest, annual percentage rate (APR), the amount the consumer is refinancing and the total number of payments the borrower must pay until the loan is paid in full. The Truth in Lending Act also contains the borrower's right of rescission. The right of rescission allows the borrower three business days after the closing of the mortgage to say they do not want to refinance the mortgage. If the borrower rescinds on the mortgage during this time period, they are not responsible for the mortgage refinance loan and their financing situation returns to what it was prior to refinancing.
  
  

Real Estate Settlement Procedures Act

• The Real Estate Settlement Procedures Act is another law that protects consumers who are refinancing their mortgage. The act requires specific disclosures to be provided by the lender to the borrower at four stages of the mortgage refinance process: when the borrower submits the mortgage refinance application; before closing; at closing; and after closing. At the time of application, the borrower must receive a good faith estimate of the closing costs on the refinance. Before closing, the borrower must receive a HUD-1 statement, which is the actual closing cost breakdown, and an Affiliated Business Arrangement Disclosure if there is a business relationship between the mortgage lender and any of the parties involved in the mortgage refinance transaction. At the time of closing, the borrower must receive a final HUD-1 statement and the escrow statement. After closing, the lender is responsible for providing an annual escrow statement and to alert the borrower of any changes in the company servicing the loan.
  
  

Equal Credit Opportunity Act

• The Equal Credit Opportunity Act protects borrowers from lenders making mortgage refinance lending decisions based on certain information. For example, lenders cannot use race, religion, age, sex, marital status or whether the borrower receives government assistance as a basis for loan approval or denial.