Which action does TILA require regarding adjustable-rate mortgages?

The Truth in Lending Act (TILA) requires lenders to disclose key information to consumers regarding the terms and conditions of loans, including adjustable-rate mortgages (ARMs). One of its primary objectives is to ensure that borrowers are fully informed about the nature of their loan products.

In the context of adjustable-rate mortgages, TILA mandates that lenders provide clear and comprehensible disclosures about how interest rates will adjust over time. This includes information on the frequency of adjustments, the index used for rate adjustments, caps on rate increases, and how these adjustments might affect the borrower's payments. Such disclosures enable borrowers to make informed decisions by understanding potential changes in their repayment obligations.

The other options present misunderstandings of TILA's requirements. There is no requirement for a standardized interest rate model or a prohibition on adjustable rates without borrower consent. Furthermore, TILA does not guarantee fixed rates for the first five years; instead, it focuses on transparency in the terms and adjustments of the loan.