New “Reg. Z” Rules Could Slow Closings

By Robert Freedman, Senior Editor, REALTOR® Magazine

Starting tomorrow, July 30, you could see transactions slowed as lenders try to navigate changes to rules (“Reg. Z”) on consumer disclosures under the Truth in Lending Act (TILA). By being aware of new time pressures lenders are under, you can help your clients understand what’s going on if transactions you’re working on get delayed prior to closing.

Here’s what’s happening under these “Reg. Z” changes:

Within three days of taking a loan application, lenders must give borrowers the Truth in Lending Act (TILA) disclosure and the Good Faith Estimate (GFE), then give borrowers a mandatory seven-day waiting period before the transaction can go to closing. Both the TILA disclosure and the GFE are required now but without the constrained timeline. Borrowers can elect to waive that seven-day holding period, but the Federal Reserve, which oversees TILA, says the waivers are not for the convenience of borrowers; they’re only to accommodate borrowers in the event of a financial emergency.

There’s another requirement: If the final annual percentage rate (APR) differs from the APR on the GFE by at least 0.125 percent, then another mandatory holding period of three days kicks in.

This could be a problem if the final APR isn’t known until just before the scheduled closing. You could have a situation in which the family has the moving truck all loaded only to learn the day before closing that the APR is different by at least 0.125 percent from the APR on the GFE. Suddenly the closing can’t happen as scheduled.

Until lenders start operarting under the new rules, it’s unclear if delays will be the reality. But you should know about the new rules in any case. You can look at them yourself in the Federal Register. You can also look at an NAR summary on

The rules apply to primary homes and second homes; they don’t apply to investment properties. There are other details you should know. The NAR summary can be helpful.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at

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  1. Sammy The Bull

    I would like to know who in god’s world would think of this. Why is it that some nobody in Washington come up with this. The R. E. companys are going broke and the banks are losing money everyday that the Mtg. processing is delayed. If I sell my house today I will only sell for cash. Thanks to the Dems.for all of this.

  2. Robert the realtor

    Maybe the Dems came up with this because so many people are rushed when closing a loan and are not fully aware of how the loan actually works. It is to help better inform the consumer in making a better decision. Several people impulse buy and that includes homes.Hey do you have two eyes and two legs? then sign right here your a new home owner. Worry about the details later just sign. The Bush admin allowed this. As far as banks they have been robbing people blind and taking advantage of misinformed credit challenged consumers for years. Most consumers don’t even know that that 200k home will cost them over 400k at the end of 30 yr term if it is paid according to the Amort schedule. Think lenders are going to tell the consumer “Hey you don’t have to pay double for a home, let us show you how you save on some interest. Lenders said hey even though there is a credit scoring system in place that seems pretty accurate, we can give loans to people who are less likely to pay and we can charge higher rates and make more money off of them. Gee that was smart! I feel no sorrow for these banks. If you really explained the ARM to a consumer who is not fully aware of how the credit score or that specific loan works then what do you expect. If you can’t wait 6 days to help families understand the loan and how it may affect their families and where their kids will sleep you have some serious selfish issues and it’s people like you that cause this kind of mess in the housing market.

  3. happy and blessed

    I think the new reg.z rule is a good idea ,It will keep Lenders in check.Too many times Buyers go to closings only to find their rates have been raised and they go ahead with the closing feeling coersed and pressured.Happy and blessed

  4. Sue

    Thank goodness the Dems stepped in to put an end to the robbery, lies, and deception of the American public

  5. Alex

    When there is a more informed consumer everybody wins. Thankgoodness for all the disclosure requirements. This in the end helps us Realtors.

  6. I have one closing today, 8/5/09. Though I represent the Seller, I am apalled that BofA is charging these people 4% of the loan amount ( $5,645 ) in loan charges. Buyer says they never received a GFE. I beleive them. We couldn’t get ANY information from BofA. Already 4 days late, they are pressed to close and they are paying through the nose.

  7. brenda zwahlen

    This is so typical! People make these regs without thinking through the ramifications! Even if the intentions were good, any intelligent analysis of the plan would have pointed out unacceptable consequences! Instead of helping people, the end result is that it could really harm both buyers and sellers! It’s just a mess!

  8. Jess

    What ever happened to personal responsability? When I bought my first home at the age of 23 I read every document prior to signing, I asked questions about anything I didn’t understand, and I got 2-3 GFE’s from different lenders to make sure I wasn’t getting screwed. I have bought and sold several homes and investment properties since that time, and still follow the same rules. Now as a broker I encourage all of my clients to do the same.

    If someone isn’t willing to do the hard work, or have the backbone to walk away when they need to I don’t feel sorry for them when they get screwed.

    It seems we are now to rely on the government to protect us instead of the brain God gave us.

  9. RealityRealtor

    Hey Jesse – Consumers can read every single line of their mortgage package (I hardly imagine you actually did this sitting at your own closing), and yet numbers, employment/credit history can be changed and “poof”, you’ve got a great application ready for the underwriter! That’s FRAUD. Haven’t heard about those predatory lenders? Changing information, sweet talking consumers, lying? We’ve all been taken on something along our way, but the uneducated are the ones who suffer. Well, where’s the LENDER’s responsibility? Heck, where’s the real estate AGENT’s responsibility? Through no fault of many consumer, folks got screwed–not all consumers in trouble dealt with fraudulent lenders, but plenty enough for the Feds to get involved. I agree that we should not rely on the government to protect us, but sadly, there were actually strict regulations in place that could have prevented all of this, but our representatives were asleep at the wheel (I called mine, did you call yours?). And I was 100% against the bank bailouts. Banks acting ethically and who were in the black (the smaller, local ones) would have survived and thrived while the large, greedy ones would have just gone away. Instead, the bailout $$ was handed out to banks to pass along to the struggling homeowners through the “Making Home Affordable” program (share this with your clients). But the recent headline, “$75B Mortgage Program Aids Just 9% of Eligible Homeowners” confirms that bonuses were more important to “hand out” than giving our struglling neighbors a “hand up”. Help your clients, folks. We share the responsibility here, too.

  10. Jess

    Reality Realtor:

    At the closing table I review everything, then (because most of my loans had a 3 day right of rescission) I go home and read every single word on every single page within three days. I’m sure it drives the escrow agent crazy, but it is my right and my responsibilty. She has learned to leave extra time for my closings.

    Yes I’ve heard of preditory lenders and they need to be caught and prosecuted and jailed. All who are involved in fraud ought to be prosecuted and jailed too, including, lenders, banks, consumers, and all else who participated in the fraud.

    It is my opinion that there are plenty of laws, and regulations on the books and we don’t need more. GFE’s are good things, I don’t want to see them go away. At some point the good intentions of big brother starts to screw things up rather than make them better. Use the laws we have now, I don’t see any reason to add more new regulations that for the most part simply repeat what’s already there. ENFORCE what’s there!!!! Quit throwing out the whole barrel of apples just because there are a few rotten ones, take the time to sift out the rotten ones.

    A large part of my job is to try to educate my clients. Among other things I always recommend mortgage shoping and comparing and suggest several reputable lenders. At closing I encourage them to take thier time and reivew what they are signing. I can not help if they choose not to do these things! These people are choosing to remain ignorant in favor of laziness. I can lead the horse to water, but I can’t make it drink.

    I was not in favor of the bail out, I agree with you. I’m not in favor of the banks or mortgage broker instead of the borrower. I believe the borrower is in the final position and MUST stand up for themselves, educate themselves, and make wise choices. This does not exonerate the lenders, they should be prosecuted when appropriate.

    PS I’m a tiger at the used car lot too! 🙂 They run away when I come because I refuse to get “sold” to, and can see right past all thier antics, I CHOOSE to be an informed consumer.

  11. Tim Love

    Is a Reg Z rule change from July 2009 the most current that NAR is on the current state of the mortgage changes coming your way? This is really disappointing to see. Seems to me Realtor organizations everywhere should be a little more concerned about the mortgage market than news affecting mortgage professionals from over a year ago.
    The new Reg Z rules coming into effect next week (April 1, 2011) will have way more far-reaching negative impact on teh Real Estate MArkets than those that took place just a year and a half ago. Does NAR take a stance on this issue? Anybody know?
    Hold on to your seats… the rides not over.

  12. mary lou plant

    does the TILA disclosure 3 day period apply to a person wanting to REfinance a SECOND home?

  13. Stacey Moncrieff

    TILA applies to any loan against a primary residence.