How Regulations X and Z Impact Real Estate Attorneys

Regulations X and Z have been used to implement the Real Estate Settlement Procedures Act and the Truth in Lending Act for decades. In 2010, the Dodd-Frank Act amended those rules, specifically the rules on the servicers’ obligations. In this post, we’ll take a look at Regulations X and Z separately to highlight these changes.

Regulation X

Regulation X implements the Real Estate Settlement Procedures Act of 1974 (RESPA). The Dodd-Frank changes specifically:

  1. Addresses the servicer’s obligations to correct errors asserted by borrowers.
  2. Provide certain information requested by borrowers, and provide protections to such borrowers in connection with force-placed insurance.
  3.  Loan providers are obligated to establish reasonable policies and procedures to achieve delineated objectives, and provide information about loss mitigation options to delinquent borrowers.
  4. Establish policies and procedures for providing delinquent borrowers with continuity of contact with servicer personnel.
  5.  Requires servicers to evaluate borrowers’ applications for available loss mitigation options.

Regulation Z

Regulation Z implements the Truth in Lending Act (TILA) and the official interpretation to the regulation. The Dodd-Frank Act impacts are as follows:

  1. Requires lenders to disclose all terms of a loan to potential borrowers, including interest rates, fees and length of loans.
  2. Allows consumers to cancel credit transactions requiring a lien to be placed on the borrower’s primary residence.
  3. Requires servicer to provide periodic statements for residential mortgage loans.
  4. Requires servicers to promptly credit mortgage payments.
  5. Requires servicers to respond to requests for payoff amounts.

Regulation Z is sometimes construed as the implementation of TILA because it amended the rules governing the scope, timing, content, and format of disclosures to consumers regarding interest rate adjustments to variable-rate transactions.

How The Regulations Affect Real Estate Attorneys

Regulations X and Z impact the servicers of mortgages and home loans – banks and lenders. Real estate attorneys are affected in two ways:

  1. Initial Closing Disclosures and Loan Estimates. If you are facilitating the closing or reviewing the documents for your client before the closing, pay special attention to the Closing Disclosure Forms and Loan Estimates. TRID is supposed to make the loan terms and related costs more transparent for consumers. Make sure the documents are in order and that your client understands their obligations under the loan terms. Attorneys can also ensure compliance with the new timing requirements, particularly if they are managing the closing themselves instead of outsourcing it to a title agency.
  2. Servicing Clients. Attorneys can help ensure compliance with these rules on behalf of their clients. If clients come to you complaining of the service they have received on their mortgage or with an inability to pay their mortgage, refer to the initial loan documentation and make sure all of the regulations were followed.

Creditors must take into account a borrower’s ability to repay the loan and must be upfront about rate changes, particularly where ARMs are concerned. They must also provide opportunities for pre-payment without assessing penalties.

The final rule requires creditors to retain evidence of compliance with the rule for three years after a loan is consummated. If your client approaches you with concerns after this time period, you may want to take a close look at how the mortgage has been handled recently.

To learn more about TRID and staying in compliance with the new rules, contact Easy Soft and find out about how our real estate closing software for attorneys can help you through the new law changes.