What is Regulation X?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 08 November 2019
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The term “Regulation X” can refer to two different regulations in the United States. One, passed by the Federal Reserve Board, concerns credit extended to people who purchase United States Treasury securities. The other, also known as the Real Estate Settlement Procedures Act (RESPA) is concerned with the process of completing real estate sales. People who participate in such sales are monitored by the Department of Housing and Urban Development to determine whether or not they are adhering to legislation such as Regulation X.

The Regulation X that is enforced by the Federal Reserve Board sets limits on the credit people in the United States or acting on behalf of people and institutions in the United States can receive to buy Treasury securities. Known as purpose credit, this type of credit is extended by brokers, dealers, bankers, and other lenders who are authorized to do so under the law. Limits on credit are designed to protect both the American economy and individual consumers.

Regulation X comes into play when credit would exceed or violate Regulations T and U, which spell out the terms surrounding offers of purpose credit for brokers and dealers and banks, respectively. If a situation appears to be in violation of these regulations, the Federal Reserve Board can act to enforce the rules. Inspectors and auditors keep an eye on credit transactions and also respond to tips from whistle blowers.


When the Regulation X under discussion is RESPA, it involves the fees that can be charged at the close of a real estate transaction, required disclosures that must be made available to real estate purchasers, and other matters related to successfully closing a real estate deal. This regulation is designed to ensure that real estate buyers understand the nature of the transactions they are involved in and that they cannot be surprised with hidden fees at the close of a deal.

Tipsters can alert the Department of Housing and Urban Development to violations of Regulation X. The agency can also conduct independent investigations, including undercover investigations with agents who participate in real estate transactions. Violations can be penalized in various ways, depending on the nature of the violation. Real estate agents, lenders, and other people who may be involved in housing sales are often advised to use standardized boilerplate forms to ensure that they comply with Regulation X and that their clients are provided with everything they need to complete a smooth real estate transaction.


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Post 2

It is called a Good Faith Estimate (GFE) because that is exactly what it is: an estimate based on the best information available and given in good faith to the borrower.

As in almost any business, estimates are given to allow the consumer to make comparisons before full commitment to a product or service. The actual cost of that service may go up or down, depending upon a variety of contributing factors.

Mortgage Loan Originators and brokers are held by law to ensure that a GFE is within no more than a 10 percent variance from what the final tabulations will show. Some contributing factors can have higher than expected fees due to errors in information supplied by borrowers, credit issues that need to be cleaned up, repairs to subject real estate, extra trips by the appraiser to validate facts, flood zone designation that was not apparent to borrower at time of application, etc.

Post 1

why is the document called a Good Faith Estimate? why only estimate charges?

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