Final answer:
The True-in-Lending Act requires certain disclosures in loan advertisements, but it does not require the disclosure of mortgage servicing information. Instead, it includes requirements for APR, repayment terms, and down payment details. Banks can be assured of loan repayment through credit history, income verification, collateral, higher down payments, or cosigners.
Step-by-step explanation:
The True-in-Lending Act requires certain disclosures in loan advertisements to protect consumers by providing them with loan terms in a clear and understandable way. However, the Act does not require the disclosure of mortgage servicing information in advertisements. The required disclosures typically include the annual percentage rate (APR), terms of repayment, and the amount or percentage of the down payment. Disclosing such information helps borrowers to compare different loan offers effectively.
When facing imperfect information about a borrower's ability to repay a loan, a bank may be reassured by several methods. The potential borrower can provide a strong credit history, stable income verification, and possibly collateral. They may also agree to a higher down payment or offer a co-signer to guarantee repayment. Furthermore, entities such as the Federal Reserve (the Fed) ensure banks abide by a variety of consumer protection laws, preventing discrimination based on age, race, sex, or marital status and promoting transparency in loan distributions.