We do not know whether arbitration clauses are common in mortgage documents. However, for consumer mortgages that are secured by a dwelling, including open-end mortgages secured by a consumer’s principal dwelling, Regulation Z prohibits mandatory arbitration clauses, as well as any “terms that require arbitration or any other non-judicial procedure to resolve any controversy or settle any claims arising out of the transaction.” In addition, both Fannie Mae and Freddie Mac will not purchase mortgages if the mortgage documents include a mandatory arbitration clause.

For citations related to our guidance, please see below:

• 12 CFR 1026.36(h)(1) (Regulation Z provisions regarding mandatory arbitration clauses)