Loan Officer Practice Exam 2026 – Comprehensive All-in-One Guide for Exam Success!

The concern under the Truth in Lending Act (TILA) primarily focuses on ensuring that borrowers are fully informed about the terms and costs associated with their loans. Prepayment penalties are a specific feature that can impact a borrower's ability to refinance or pay off their loan early without incurring additional costs.

By prohibiting or regulating prepayment penalties, TILA aims to protect borrowers from being locked into unfavorable loan terms that can hinder their financial flexibility. This aspect of TILA is crucial for promoting transparency and fair lending practices, ensuring that consumers are aware of the potential costs that could arise if they choose to pay off their mortgage before the end of the term.

While other features like minimum down payment, points and fees restrictions, and loan purpose verification are important, they do not directly address the same level of borrower protection associated with prepayment penalties under TILA. The focus on prepayment penalties reflects the Act's intent to safeguard consumers against potentially detrimental financial implications when managing their mortgage obligations.