Q: How should the Rate Lock field be completed on the Loan Estimate?
A: Regulation Z has technical requirements for the completion of the Rate Lock field. While creditors should review regulatory conditions and commentary, a general description of the requirement is as follows:
The Rate Lock field is provided to disclose whether the interest rate [disclosed in the loan terms section, on the 1st page of the Loan Estimate] is locked for a specific period of time. This will consist of checking the “No” or “Yes” box on the Loan Estimate. The disclosure also includes:
For transactions with a locked rate, the disclosure must provide the date and time (including time zone) when that period ends.
The Rate Lock statement shall be accompanied by a statement that the interest rate, any points, and any lender credits may change unless the interest rate has been locked, and the date and time (including time zone) at which estimated closing costs expire.
The Reg Z commentary to 1026.37(a)(13) refers to a rate lock that is “subject to contingencies that are described in any rate lock agreement between the creditor and consumer.” This commentary has generated questions as to whether rate lock agreements must be in writing in order for the Rate Lock question to be checked as “Yes” on the Loan Estimate. The CFPB addresses this most clearly within the preamble to their final rule (as published on 12/31/13) in their section-by-section analysis regarding the rate lock disclosure, as follows:
“Regarding the situation where the creditor has a policy to honor the rate quoted without a
rate lock agreement, both proposed §1026.37(a)(13) and comment 37(a)(13)-1 expressly
contemplate a rate that is locked for a specific period of time pursuant to a rate lock agreement.
Accordingly, where a creditor has a policy to honor the quoted rate, but does not lock the rate
pursuant to a written agreement with the consumer, the creditor would disclose “no” pursuant to
§ 1026.37(a)(13)(i). The Bureau believes this disclosure is appropriate to aid the consumer’s
understanding of the transaction, because the creditor would not be bound by an agreement to
provide the interest rate to the consumer at consummation.”
ADDITIONAL INFORMATION – The regulatory citation for this topic can be found in 12 CFR 1026.37(a)(13).