First Guaranty Mortgage Corporation - Compliance Department



What is an “application” that triggers an obligation to provide a Loan Estimate?

An application means the submission of a consumer’s financial information for purposes of obtaining an extension of credit. For transactions subject to § 1026.19(e), (f), or (g), an application consists of the submission of the following six pieces of information:
  • The consumer’s name;
  • The consumer’s income;
  • The consumer’s social security number to obtain a credit report;
  • The property address;
  • An estimate of the value of the property; and
  • The mortgage loan amount sought.
An application may be submitted in written or electronic format, and includes a written record of an oral application.

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 6.5


Are creditors allowed to require additional verifying information other than the six pieces of information that form an application from consumers before providing a Loan Estimate?

No. A creditor or other person may not condition providing the Loan Estimate on a consumer submitting documents verifying information related to the consumer’s mortgage loan application before providing the Loan Estimate. (§ 1026.19(e)(2)(iii); Comment 19(e)(2)(iii)-1)

For example:
  • A creditor may ask for the sale price and address of the property, but may not require the consumer to provide a purchase and sale agreement to support the information the consumer provides orally before the creditor provides the Loan Estimate.
  • A mortgage broker may ask for the names, account numbers, and balances of the consumer’s checking and savings accounts, but the mortgage broker may not require the consumer to provide bank statements or similar documentation to support the information orally provided by the consumer before the creditor provides the Loan Estimate.
Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 13.6


What if a creditor receives these six pieces of information, but needs to collect additional information to proceed with an extension of credit?

This definition of application does not prevent a creditor from collecting whatever additional information it deems necessary in connection with the request for the extension of credit. However, once a creditor has received the six pieces of information discussed above, it has an application for purposes of the requirement for delivery of the Loan Estimate to the consumer, including the three-business-day timing requirement. (Comment 2(a)(3) -1)

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 6.6


What if the consumer withdraws the application or the creditor determines it cannot approve it? (Comment 19(e)(1)(iii)-3)

If the creditor determines within the three-business-day period that the consumer’s application will not or cannot be approved on the terms requested by the consumer, or if the consumer withdraws the application within that period, the creditor does not have to provide the Loan Estimate. (Comment 19(e)(1)(iii)-3). However, if the creditor does not provide the Loan Estimate, it will not have complied with the Loan Estimate requirements under Regulation Z if it later consummates the transaction on the terms originally applied for by the consumer. (Comment 19(e)(1)(iii)-3)

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 6.7


Are there any limits on fees that may be charged prior to disclosure or application?

Yes. A creditor or other person may not impose any fee on a consumer in connection with the consumer’s application for a mortgage transaction until the consumer has received the Loan Estimate and has indicated intent to proceed with the transaction. (§ 1026.19(e)(2)(i)(A))

This restriction includes limits on imposing:
  • Application fees;
  • Appraisal fees;
  • Underwriting fees; and
  • Other fees imposed on the consumer.
The only exception to this exclusion is for a bona fide and reasonable fee for obtaining a consumer’s credit report. (§ 1026.19)(e)(2)(i)(B); Comment 19(e)(2)(i)(A)-1 through -5 and Comment 19(e)(2)(i)(B)-1)

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 13.2


What does it mean to impose a fee?

A fee is imposed by a person if the person requires a consumer to provide a method for payment, even if the payment is not made at that time. (Comment 19(e)(2)(i)(A)-5)

This would include, for example:
  • A creditor or mortgage broker requiring the consumer to provide a check to pay for a processing fee before the consumer receives the Loan Estimate, even if the check is not to be cashed until after the Loan Estimate is received and the consumer has indicated an intent to proceed.
  • A creditor or mortgage broker requiring the consumer to provide a credit card number for a processing fee before the consumer receives the Loan Estimate, even it the credit card will not be charged until after the Loan Estimate is received and the consumer has indicated an intent to proceed.
Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 13.4


How does a consumer indicate an intent to proceed with a transaction?

A consumer indicates intent to proceed with the transaction when the consumer communicates, in any manner, that the consumer chooses to proceed after the Loan Estimate has been delivered, unless a particular manner of communication is required by the creditor. (§ 1026.19(e)(2)(i)(A))

This may include:
  • Oral communication in person immediately upon delivery of the Loan Estimate;
  • Oral communication over the phone, written communication via email, or signing a pre-printed form after receipt of the Loan Estimate.
A consumer’s silence is not indicative of intent to proceed. (Comment 19(e)(2)(i)(A)-2)

The creditor must document this communication to satisfy the record retention requirements of § 1026.25.

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 13.3

 
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