Concepts Definitions
• Negative Amortization: An increase in a loan’s outstanding balance because the periodic payments are less than the interest due, causing the principal amount to grow.
• Truth-in-Lending Act (TILA) / Regulation Z: A federal law that requires lenders to fully and properly disclose all financial contract items in advertising and loan documents, ensuring consumers receive clear and non-misleading information.
• Annual Percentage Rate (APR): The total cost of credit expressed as an annual rate, including the interest rate and all other loan fees and charges. TILA requires its clear disclosure in advertisements.
• Blind Ad: An advertisement placed by a real estate licensee that does not clearly identify the individual or their professional status as a licensed agent or broker, which is generally prohibited.
• Qualified Mortgage (QM): A category of mortgage loans designed with specific criteria, generally prohibiting risky features like negative amortization, to ensure a borrower’s ability to repay.
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