With all the talk of mortgage interest rates, we thought it was high time for a reminder of what Regulation Z requires of real estate agents when discussing things like interest rates or monthly payments with clients or customers.
“No legacy is so rich as honesty.” Who would have guessed that an utterance penned by William Shakespeare in 1623 would be applicable in the realm of real estate financing 400 years later? Though perhaps lacking the rhythm and measure of iambic pentameter, there are laws that work to insure honesty and full disclosure of credit terms when lending money, focusing in this case on real estate transactions. So who exactly is this regulatory hero, detailing the requirements of the merchant whilst providing protection and assurance to the trusting customer?
[Enter The Truth in Lending Act, stage right]
Truth in Lending Act or Regulation Z
The Truth in Lending Act (TILA) or Regulation Z is a federal law enacted to provide consumer protection to make sure that consumer is aware of the cost of credit. TILA does so by making requirements of credit term disclosure by lenders, governing the realms of credit cards, loan origination, repayment standards, interest rate, and mortgage lending and servicing. With many keeping an eye on the recent rise of federal mortgage rates, it can be helpful indeed to take a moment to confirm compliance with current necessary disclosures.
The necessity of disclosure is not limited to contractual and legally-binding documents or just to mortgage lenders, real estate agents must abide by these rules as well. Though oft-forgotten, even social media posts regarding financial loans must abide by these rules as well. When any terms of a loan have been advertised then all the remaining required disclosures must also be made alongside. For example, an Instagram post advertising the monthly payment for a given property cannot err on the side of minimalism. Such a post must also include any other applicable terms of the loan, including but not limited to:
down payment amounts,
annual interest rates,
the length of the loan,
the cash price of the home,
and the number, amount, and due dates of payments to repay the debt.
In doing so, the consumer is made completely and fully aware of exactly what is expected of them in what is generally considered to be the most expensive investment one will make in their lifetime. This also ensures that you remain in compliance with federal lending laws. Full disclosure of all the terms of any financial loan opportunity that you advertise will guarantee TILA compliance and your ability to continue to lawfully conduct business.
What kind of regulation Z violations have you seen on Facebook or in the MLS lately? Let us know in the comments below or share with a colleague in an upcoming CE Class!