On July 23, the Board of Governors of the Federal Reserve System (the Federal Reserve) released proposed changes to Regulation Z (Truth in Lending) intended to improve the disclosures consumers receive in connection with closed-end mortgages and home-equity lines of credit (the Proposal).  

The Proposal includes the following specific changes to existing regulations: (i) improving the disclosure of the annual percentage rate so it captures most fees and settlement costs paid by consumers; (ii) requiring lenders to show how a consumer’s annual percentage rate compares to the average rate offered to borrowers with excellent credit; (iii) requiring lenders to provide final Truth in Lending Act (TILA) disclosures so that consumers receive them at least three business days before the loan closes; (iv) requiring lenders to show consumers how much their monthly payments might increase for adjustable rate mortgages; (v) prohibiting payments to a mortgage broker or loan officer that are based on the loan’s interest rate or other terms; and (vi) prohibiting a mortgage broker or loan officer from “steering” consumers to transactions that are not in their interest in order to increase the mortgage broker’s or loan officer’s compensation.  

In connection with the Proposal, the Federal Reserve also announced that it would work with the Department of Housing and Urban Development (HUD) to make complementary disclosures required under TILA and those required by the Real Estate Settlement Procedures Act, as administered by HUD.  

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