By Victoria Daka, Regulatory Compliance Specialist
Under the CFPB’s TILA/RESPA integrated mortgage disclosure final rule, there are certain restrictions that go into effect on August 1, 2015, regardless of when the application was received. If you recall, TILA/RESPA applies to covered applications received on or after August 1, 2015. However, there are certain restrictions that apply starting August 1st , even if the application was received prior to August 1st.
Today, as part of NAFCU’s continued blog series on TILA/RESPA, I will focus on the restriction on imposing fees on a consumer before the consumer has received the Loan Estimate and indicated an intent to proceed with the transaction, with a limited exception.
Section 1026.19(e)(2)(i)(A) prohibits imposing any fee on a consumer – application, appraisal, underwriting, or otherwise –in connection with the consumer’s application for a mortgage transaction until the consumer has received the Loan Estimate and has indicated an intent to proceed with the transaction. There is only one exception to this rule, found in section 1026.19(e)(2)(i)(B), which allows a creditor or other person to charge a bona fide and reasonable fee for obtaining the consumer’s credit report before the consumer has received the Loan Estimate. For example, the staff commentary indicates that a creditor may collect a fee for obtaining a credit report if it is in the creditor's ordinary course of business to obtain a credit report.
In general, a fee is considered “imposed” if the consumer is required to provide a method of payment, even if the payment will actually be made later. For example, the staff commentary to section 1026.19(e)(2)(i)(A) indicates that if a creditor requires the consumer to provide a check to cover a $500 “processing fee” before the consumer has received the Loan Estimate, the creditor has not complied with the rule – even if the creditor said it would not cash the check until the consumer received the Loan Estimate, and the creditor did not cash the check until the disclosure was provided and the consumer indicated his or her intent to proceed with the transaction.
Similarly, a creditor does not comply with the rule if it requires the consumer to provide a credit card number for a processing fee before the consumer receives the Loan Estimate, even if the credit card will not be charged until after the Loan Estimate is received and the consumer has indicated his or her intent to proceed with the transaction. A creditor could, however, obtain a consumer’s credit card number and charge the consumer’s credit card for a credit report fee, after the disclosures required by section 1026.19(e)(1)(i) are received, if separate authorizations are requested and received for the credit report fee and any other fees that may subsequently be imposed.
Under section 1026.19(e)(2)(i)(A), a consumer can express the intent to proceed with a mortgage transaction in any manner, unless the creditor has required a specific manner of communication. For example, oral communication in person immediately upon delivery of the Loan Estimate would comply with the rule. Similarly, oral communication over the phone, written communication via email, or signing a preprinted form after receipt of the Loan Estimate would also be permissible. However, silence is not indicative of the consumer’s intent to proceed with the transaction because it cannot be documented to satisfy the requirements of section 1026.25. To satisfy the recordkeeping requirements of section 1026.25, a creditor must document the consumer’s communication of intent to proceed with the transaction.
Be on the lookout – NAFCU’s Compliance team will continue to break down pieces of the rule as part of our TILA/RESPA blog series.