What Buyers Need to Know About Changes to Regulation Z

Truth in Lending

Jay Gallagher Bank of America

During a Century 21 Heritage Realty Associates office meeting in Newburyport this morning, Jay Gallagher, a Bank of America Mortgage Loan Officer who has a desk in each of our four offices,  gave us a critical update about recent revisions to Regulation Z.

Regulation Z (also called the Truth in Lending Act of 1968) is a consumer protection act governed by the Federal Reserve that mandates full disclosure of credit terms and the cost of credit. Makes sense that the terms of a loan are disclosed! It’s an enormously important part of a Real Estate transaction, and any change to it should be greeted as a ‘must know’.

In the interest of maintaining the integrity of information and not placing banks and/or consumers at risk, any change in the interest rate of a loan now triggers a brand new disclosure process. What exactly does that mean to a home buyer?

If a buyer is waiting to lock in a rate until just before closing – a fairly common strategy for home buyers – and the interest rate changes from the original rate in the mortgage documents, the bank will need to provide new paperwork (disclosure) and risk assessment. This takes time!

If that scenario happens three days before closing, guess what?  The loan is not going to close on time. There will not be a closing as scheduled. Pretty scary isn’t it?

So how can a buyer protect themselves?  Jay’s excellent suggestion is to lock in a rate at least 10 days before the scheduled closing. That has worked out to be ample time to handle a new full disclosure of credit terms for the HUD statement and close on time.

Bottom Line: Don’t overlook this change, be aware of all rate change implications and realize that our new financial environment is working hard to avoid all unnecessary risks to banks and consumers.

No Comments Yet

No comments yet.

Comments RSS TrackBack Identifier URI