I am looking at a consumer RE mtg loan to purchase a PR and on the TIL disclosure it indicates that "This obligation is payable on demand"; however, the borrower is not subject to Reg O.

I thought consumer RE mtg loans should not be payable on demand.

Am I understanding this corectly?

Whether it is allowed or not, would be a matter of State law. You need to read the note and see if there is a payable on demand feature included.

It just says "I will pay this loan in full immediately upon Lender 's demand. If no demand is made, I will pay this loan in 59 regular payments...."

Then there is a demand clause in the note and the disclosure is correct. Now, if you have violated State law, that is another issue.