Mortgages and Regulation Z

Allison Beatty
LoanBiz Columnist


If you're shopping for a mortgage you may have heard references to "Regulation Z." What is this regulation and does it affect you?

Regulation Z Implemented the Truth in Lending Act

Regulation Z is a Federal Reserve regulation that set the Truth in Lending Act in motion. The Truth in Lending Act is an important consumer credit regulation designed to promote open and fair credit practices.

Truth in Lending Act Adds Consumer Rights

The Truth in Lending Act gives consumers a wide range of rights when it comes to mortgage and other credit transactions. Borrowers must be given written disclosure on the cost of credit, including the finance charge and annual percentage rate. The act also requires:

• Disclosures about terms and costs of mortgage and other financing.
• That consumers have the right to cancel certain credit transactions (involving a lien on a principal dwelling).
• Regulation of certain credit card practices.
• A means for dispute of credit billing issues.

Mortgage Documents Made Simpler

The regulation also requires mortgage documents to be clear and detailed regarding rates and charges. For example, a mortgage with a variable interest rate that is secured by a consumer's dwelling must list the maximum interest rate clearly in the loan documents.

Regulation Z and The Truth in Lending Act are designed to protect consumers in their mortgage and other credit transaction. The regulation provides clear guidelines for what mortgage and other lenders need to disclose. As you shop for a mortgage, ask lenders for information on Regulation Z and The Truth in Lending Act. You'll see how these provisions make mortgage shopping and comparison a smoother process.

Source
FDIC

About the Author
Allison E. Beatty is a syndicated real estate writer who has been writing home improvement columns for 15 years.