Truth in Lending Act

by Luke from Seattle, WA USA

Ask Kate: Truth in Lending Act and Mortgage Rate Lock Fee Hello Kate, Do you know if there is a right of rescission under the Truth in Lending Act for a lock break fee? I know the rescission rule applies to the actual loan closing but am not clear whether it applies to the rate lock as well.

I need to get out of a rate lock and am still within the 3 days. Thanks, Luke

Kate Answers: Truth in Lending Act Protection

Ask Kate at
Hi Luke,

The Truth in Lending Act is a federal law to protect consumers during credit transactions by disclosing the arrangement of terms and cost.

You'll also hear it referred to as TILA and Reg Z. Mortgage borrowers benefit from its role is as protector.

This is why after signing final loan documents, homeowners experience a three day waiting period before the mortgage is finalized. Although many times perceived as inconvenience, it is meant to protect homeowners.

In fact, once I received a call from one of my borrowers who were refinancing because their adjustable rate mortgage payments were too high compared to the current fixed rates. Over the week-end, they got written notice that their ARM was scheduled to decrease. This made their refinance unnecessary. So they rescinded and owed no money to the bank due to the protection of the Truth in Lending Act.

Mortgage Rate Lock Agreements

Your letter sounds like you are hoping to use the Act to break a mortgage rate lock agreement or perhaps to avoid paying an associated fee.

Because I am not familiar with the terms of your agreement, I can't give you a specific answer.

But you live in Seattle where escrow companies close many mortgage transactions. You can try calling your escrow since they are normally well-versed in the Truth in Lending Act.

Be prepared to be a little more specific when you talk to escrow. Are you looking for a refund on your mortgage rate lock deposit or trying to avoid paying a fee associated with breaking the lock?

More Ask Kate Help

In the meanwhile, I recommend looking over the links at the bottom of this page. They lead to other pages on my website with surprisingly simple information on mortgage rate locks. I hope you will let me know if you have more questions.

Take a moment to bookmark Truth in Lending Act to your favorites and return often for more mortgage tips.

Luke, this is your page. So you can invite friends to comment on it. They can also ask another question of their own like you did.

Best wishes,

Ask Kate

Finding Help for Locking Rates

My Interest Rate Lock Guarantee - Help for timing your rate lock.

The best solution to avoiding hidden fees is to ask the right questions before you lock mortgage rates.

Get mortgage broker fees in writing or your rate lock is meaningless!

How good is a mortgage interest rate lock guarantee?

Yield Spread Premium is a common reason for losing your rate lock.

Questions to ask before you lock.

Search questions and answers at Ask Kate Mortgage Rate Lock Center I.

More questions and answers at Ask Kate Mortgage Rate Lock Center II.

> > Truth in Lending Act

Click here to add a comment.

You can also ask Kate about your mortgage at Refinancing Advice The Nuts and Bolts.

Recent Articles

  1. Kate's Mortgage Rate Report August 11: Rates Bouncing Like a Ping Pong Ball

    Aug 11, 16 10:49 AM

    Kate's mortgage rate report for the week ending August 11, 2016: Rates Bouncing Like a Ping Pong Ball
    Mortgage interest rates have been bouncing like a ping pong ball: After last Friday's strong job report began pushing up mortgage rates, the market is now hinting at a reversal, with the 30-year hover…

    Read more

  2. Ask Kate how to avoid unauthorized mortgage rate extension fees

    Aug 11, 16 10:18 AM

    Ask Kate how to avoid unauthorized mortgage rate extension fees
    Ask Kate how to avoid unauthorized mortgage rate extension fees:

    After locking in her rate, the bank sent a Texan homeowner, Laura, notification of several thousand in fees that she must pay in order…

    Read more