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Regulatory resources and other tools that are related to second mortgages are available on the Consumer Financial Protection Bureau’s website. The tools include explanations of product types, details about required disclosures, and help with product and lender comparisons.
While the CFPB does not specifically address “second mortgages” as a product, they do provide information on home-equity loans and home-equity lines of credit, which are both types of second mortgages.
A CFPB booklet, WHAT YOU SHOULD KNOW ABOUT Home Equity Lines of Credit, helps prospective HELOC borrowers decide whether a home-secured credit line is the right financial product for them. The pros and cons of other sources of cash — including closed-end second mortgages, first-mortgage cash-out refinances, and unsecured lines of credit — are examined, and consumers are encouraged to comparison shop.
Another CFPB page, What is a home equity loan?, explains HELOANs, also know as HELs. The CFPB suggests that borrowers who are using the loan to consolidate debt should first consult a credit counselor. The agency warns consumer that lenders charging “big fees up-front” are a red flag.
Second mortgages are covered by the Truth In Lending Act, Regulation Z, and the CFPB provides TILA regulations on the page, 12 CFR Part 1026 – Truth in Lending (Regulation Z).
On the page entitled, § 1026.40 Requirements for home equity plans, the CFPB discusses requirements for open-end credit plans secured by the consumer’s dwelling.
While the information and resources provided by the CFPB are not a substitute for professional financial advice, they are a helpful tool for consumers.
