Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 9

Al and Betty Smith's home is valued at $200,000. They have paid off their mortgage and own the house outright-that is, they have 100 percent home equity. They lost most of their savings when the stock market declined during the Great Recession. Now they want to start a new business and need funds, so they decide to obtain a home equity loan. They borrow $150,000 for ten years at an interest rate of 12 percent. On the date they take out the loan, a ten-year Treasury bond is yielding 3 percent. The Smiths pay a total of $10,000 in fees to Alpha Bank. The Smiths are not given any notice that they can lose their home if they do not meet their obligations under the loan. Two weeks after completing the loan, the Smiths change their minds and want to rescind the loan.
Is the Smiths' loan covered by the Truth-in-Lending Act as amended by the Home Ownership and Equity Protection Act? Why or why not?