Navigating Reg Z: Essential Updates and Compliance Strategies in 2026
As we step into 2026, the mortgage landscape continues to evolve under the watchful eye of the Consumer Financial Protection Bureau (CFPB) and (worst of all!) state regulatory groups. At the heart of these changes is Regulation Z, which implements the rules for the Truth in Lending Act (TILA). TILA remains a cornerstone for ensuring transparency in mortgage lending. Whether you're a lender, servicer, or compliance officer, staying ahead of Reg Z isn't just about avoiding fines; it's about building trust with borrowers in an era of rising interest rates, digital applications, and innovative financing like green energy loans.
In this post, we will dive into the essentials of Reg Z for mortgages, highlight key 2026 updates, and share practical tips to keep your operations compliant.
Reg Z - Why It Matters
Regulation Z requires clear, standardized disclosures about the true cost of credit, empowering borrowers to make informed decisions. For the mortgage industry, it covers everything from initial applications to servicing statements. Core protections include:
Ability-to-Repay (ATR) and Qualified Mortgages (QM): Lenders must verify a borrower's ability to repay before originating a closed-end consumer credit transaction secured by a dwelling. QMs offer a safe harbor from liability if they meet criteria like a debt-to-income (DTI) ratio of 43% or less and no risky features like negative amortization.
TRID Disclosures (TILA-RESPA Integrated Disclosure): The Loan Estimate (LE) must be provided within three business days of application, and the Closing Disclosure (CD) at least three days before closing. These forms standardize cost breakdowns, preventing surprises at the table.
High-Cost Mortgages (HOEPA): Loans exceeding APR or points-and-fees thresholds trigger extra safeguards, such as counseling requirements and bans on balloon payments.
These rules are not static. They adjust annually for inflation and respond to market shifts, ensuring they stay relevant amid economic flux.
Key 2026 Updates: What Mortgage Professionals Need to Know
While the CFPB has been somewhat defanged by the current administration, the rules and regulations regarding Reg Z remain in place. Further, many state regulators believe it is now their job to step up enforcement. The current regulatory agenda signals ongoing scrutiny of mortgage practices, with long-term monitoring of the residential market to potentially tweak ATR and QM definitions. Here's what's top of mind for 2026:
Annual Threshold Adjustments: Reg Z thresholds for exemptions, HOEPA, and QMs are indexed to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The 2025 adjustments, effective January 1, raised the asset-size exemption to $2.717 billion for certain first-lien higher-priced mortgages and the general exemption to $71,900. For 2026, expect similar modest increases based on CPI-W data from June 1, 2025. This will likely be announced in late 2025. These tweaks affect small creditors and rural lenders most, so audit your portfolio now to anticipate shifts in QM eligibility.
PACE Financing Comes Under the Umbrella: A game-changer for sustainable home improvements: The CFPB's final rule on Residential Property Assessed Clean Energy (RPACE) financing integrates these tax-lien products into Reg Z, effective March 1, 2026. RPACE loans finance energy-efficient upgrades (like solar panels) via property taxes, often subordinate to primary mortgages. Key implications:
Disclosures: Creditors must provide TILA-style ability-to-repay assessments and counseling notices.
Servicing: Periodic statements mirroring mortgage requirements.
For Lenders: If your borrowers pursue RPACE, factor in how these liens impact LTV ratios and ATR calculations. Non-compliance could trigger rescission rights or CFPB enforcement.
ATR/QM Monitoring and Potential Revisions: The CFPB is actively reviewing whether current ATR/QM rules adequately protect consumers without stifling access to credit. While no immediate overhauls are slated for 2026, expect advance notices of proposed rulemaking (ANPRs) soliciting industry input. This could mean expanded pricing thresholds for General QMs or adjustments for non-QM products in a post-GSE patch world.
Digital and AI Compliance Scrutiny: With mortgage apps going fully digital, Reg Z's e-delivery rules (via E-SIGN Act) are under the microscope. The CFPB's 2025 agenda hints at guidance on AI-driven underwriting, ensuring algorithms don't obscure disclosures or skew ATR assessments. Pro tip: Document your tech stack's audit trails to prove fair lending.
Compensation and Broker Rules: An advance notice from 2025 explores rescinding certain loan originator compensation limits under Reg Z, potentially easing restrictions on non-institutional investors. Watch for final rules that could reshape broker incentives.
Compliance Checklist for 2026
At The Commonwealth Group, we are notifying our customers the importance of updating their Reg Z and TRID policies. This checklist hits the high points of our recommendations:
Train Staff: Refresh on TRID timing and PACE disclosures.
Update Systems: Integrate 2026 thresholds into LOS and servicing platforms.
Audit Disclosures: Randomly sample LEs and CDs for accuracy.
Risk Assessments: Evaluate AI tools for Reg Z alignment.
If your company has not carried out an internal audit on your Reg Z and TRID compliance, now is the time. Simply put, violations of Reg Z and TRID are not cheap. Statutory damages up to $4,000 per violation (more in class actions), plus attorney fees and loan rescission. The CFPB's enforcement hammer has dropped millions on non-compliant lenders… don't join the list.
A Call to Action
Regulation Z in 2026 underscores the regulator’s commitment to borrower-centric lending amid tech-driven efficiencies. By embracing the rules, the mortgage industry can foster sustainable growth while dodging pitfalls.
One of the best ways to do this is by engaging the consulting professionals at The Commonwealth Group.
If your company would like more information on reviews or internal audit of your Reg Z or TRID compliance or what The Commonwealth Group can do for your organization, contact Martin Luplow at [email protected] . Commonwealth has the expertise to guide your company, whether a bank, a credit union, or independent mortgage banker through the complexities of Reg Z and TRID.
In addition, The Commonwealth Group offers a variety of training, fulfillment, and consulting services for bank, credit unions, mortgage lenders, and mortgage brokers. After all, The Commonwealth Group is Innovative Services for the Mortgage Industry.
West Beibers, CMB, AMP, CRU
Chief Executive Officer
The Commonwealth Group Companies