Mortgage Loan Originator (MLO) Licensing Practice Test 2025 - Free MLO Practice Questions and Study Guide

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Question: 1 / 605

What is one of the primary purposes of the Truth in Lending Act (TILA)?

To prevent mortgage fraud

To ensure borrowers are informed about loan terms

The primary purpose of the Truth in Lending Act (TILA) is to ensure that borrowers are fully informed about the terms and costs associated with their loans. This federal law requires lenders to disclose specific information in a clear and understandable manner, including the annual percentage rate (APR), finance charges, and other key terms of the loan agreement. By providing borrowers with this essential information, TILA aims to promote transparency and help consumers make informed decisions when shopping for credit and loans.

While other factors such as preventing mortgage fraud, regulating interest rates, and eliminating prepayment penalties are important considerations in the lending industry, they are not the main focus of TILA. This law specifically seeks to empower consumers with knowledge about their loans, which is crucial for fostering fair lending practices and preventing deceptive lending practices.

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To regulate interest rates

To eliminate prepayment penalties

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