Military Lending Act Regulations Effective in October – NMP Skip to main content

Military Lending Act Regulations Effective in October

Gavin T. Ales
Oct 12, 2016

Effective Oct. 3, 2016, the Department of Defense revised regulations pertaining to the Military Lending Act (MLA) to align its applicability with most consumer credit as defined in Regulation Z, which implements the Truth-in-Lending Act (TILA). With this revision, the MLA regulations now apply to consumer credit, both closed- and open-end –such as consumer loans and credit cards. Specifically, the MLA regulations will apply to credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is (i) subject to a finance charge, or (ii) payable by a written agreement in more than four installments.

Both the MLA and the revised regulations maintain a general exclusion for “residential mortgages” from the definition of consumer credit, which is defined in the revised regulation as “any credit transaction secured by an interest in a dwelling, including a transaction to finance the purchase or initial construction of the dwelling, any refinance transaction, home equity loan or line of credit, or reverse mortgage.” However, the definition of “residential mortgages” does not include loans secured by vacant real property (that is not intended to construct a dwelling, which is excluded).

Accordingly, while most residential mortgage lending falls under the MLA regulations’ definition of “residential mortgages,” and thus would be excluded from the MLA, any transaction secured by vacant land is still covered under the MLA regulations. (Note: some industry groups have proposed to the DOD a solution by expanding the definition of residential mortgages to exclude any “credit transaction secured by an interest in real property or a dwelling …”)

Coverage under the MLA requirements for loans secured by vacant land requires lenders to have in place a program for identifying covered borrowers (i.e. members of the armed forces serving on active duty or Active Guard or Reserve duty, or their dependents), limitation of a covered loan’s Military APR (MAPR) to a maximum of 36 percent and additional disclosure requirements to the covered borrower.

The MAPR uses the APR calculation provided under Regulation Z, but with specific inclusions of certain types of charges and provides that some exceptions for inclusion in the APR calculation provided by Regulation Z are inapplicable to the MAPR calculation.

For loans governed by the MLA regulations, lenders must also provide the covered borrower a Statement of the MAPR and a Payment Schedule outlining the payment obligations of the borrower.



Gavin T. Ales is chief compliance officer with Torrance, Calif.-based DocMagic Inc. He may be reached by phone at (800) 649-1362, ext. 6446 or e-mail [email protected].



This article originally appeared in the September 2016 print edition of National Mortgage Professional Magazine.

Published
Oct 12, 2016
CFPB Seeks Insight On Creating A Fairer Mortgage Market

The Consumer Financial Protection Bureau has been actively looking to create a fairer mortgage market, free of discriminatory engagements. To do so, it issued a Request for Information to seek input on rules implementing the Home Mortgage Disclosure Act.

Regulation and Compliance
Nov 17, 2021
Regulators Renew Effort to Protect Against Foreclosures

CFPB, The Fed, FDIC and other agencies will watch for compliance with COVID-19 protections

Regulation and Compliance
Nov 10, 2021
Fed To Begin Tapering Asset Purchases by 14.3% This Month

Also sets target range for the federal funds rate at 0 to 1/4%.

Regulation and Compliance
Nov 03, 2021
CFPB Cracks Down On Discriminatory Credit Reporting For Black And Hispanic Consumers

Consumers in majority Black and Hispanic neighborhoods are far more likely to have disputes appear on their credit reports. 

Regulation and Compliance
Nov 03, 2021
CFPB Names 2 New Assistant Directors

Former Obama Administration officials will lead Supervision Policy, Enforcement divisions.

Regulation and Compliance
Oct 29, 2021
FHFA Proposes Extra Disclosure Rules For Fannie, Freddie

The proposed rule for the Enterprise Regulatory Capital Framework seeks to put Enterprises on a "level playing field" with U.S. banking requirements.

Regulation and Compliance
Oct 28, 2021