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Does federal law apply to residential home purchases?

Does a residential buyer have more protections than a commercial buyer? There's at least one difference: a federal law called the Truth in Lending Act.

The TILA imposes certain disclosure requirements on lenders in a residential mortgage transactions. The consequences for failing to comply with those TILA-mandated disclosures are steep. If a breach occurred, a borrower may be able to rescind the borrowing agreement up to three years after the mortgage date or until the secured property is sold, if that comes first. 

In addition, the TILA includes other protections to residential buyers. For three days after a transaction, a homebuyer can usually rescind the residential mortgage for any reason. However, the manner by which a borrower exercises that write to rescind may require a specific notification procedure. Although some jurisdictions may simply allow any written notice of rescission to be provided to the lender, other federal courts may require the borrower to make a legal filing called a declaratory action.

This discussion is just one example of the legal issues that might arise in the context of a residential home purchase. Although a real estate agent can provide a range of services, a lawyer that focuses on residential real estate will likely have a much deeper understanding of the federal and state laws that apply to a residential mortgage contract. A lawyer's skills also include providing advocacy in the litigation or arbitration of disputes that may arise before or after the closing. Whatever the issue, whether it involves the mortgage, zoning, title examination problems or questions about the tax consequences of a proposed real estate transaction, a real estate lawyer can be a source of great assistance.

Source: Massachusetts Attorney General's Office, "Truth in Lending," copyright 2015, Commonwealth of Massachusetts

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