VIDEO: When to Provide a Loan Estimate
In this Compliance Clip (video), Adam discusses when to provide the loan estimate.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to discuss when we must provide a Loan Estimate. The question we have is: When is a creditor required to provide a Loan Estimate to a Consumer?
The answer to this question, of course, comes from Regulation Z, which is rule 1026 of the Consumer Financial Protection Bureau or CFFB rules. And we also can get information from the frequently asked questions relating to Regulation Z.
Let's take a look at the rule first. The citation for Regulation Z that we're gonna look at is 1026.19(e)(1)(iii)(A), and that section of Regulation Z states this, “The creditor shall deliver or place the Loan Estimate in the mail, not later than the third business day after the creditor receives the consumer's application.” So we're required to place the Loan Estimate in the mail or deliver it to the consumer not later than the third business day after we receive the consumer's application.
Now, when do we receive a consumer's application? Well, of course, 1026.2(a)(3)(ii) tells us that an application is received when we, as a creditor, receive six pieces of information that trigger the re-issuance of a Loan Estimate. So when we receive the six following things, this is when we have an application, because an application is just simply defined as having at least these six things. These six things include the consumer's name, the consumer's income, the consumer's social security number to obtain a credit report, a property address, an estimate of the value of the property, and the mortgage loan amount sought. When you have these six pieces of information, this is when you have an application and that starts your clock to deliver the Loan Estimate not later than the third business day after receiving that application.
The frequently asked question provides a little bit of additional explanations for us. So let's take a look at those and let's see what is said here. Frequently Asked Question Number 1 says this. It says, “Because the definition of application refers to the submission of the six pieces of information, merely maintaining such information from a previous transaction or business relationship does not constitute receipt of an application unless the consumer indicates that the information maintained by the creditors should be used as part of an application.”
Now, I would warn you, if you're doing a refinance and you have the loan on your books, I really would not want to use this statement here as an argument to an auditor or examiner that you do not have an address. Because when you have a refinance, you know what the address of the property is, which is much different from when a customer is purchasing a loan and purchasing a home. If someone wants to have a purchase and they're shopping for a home, they're not gonna have an address. And that's where you may not have the six pieces of information. But on a refinance, they know where they live, you know where they live, and I really wouldn't go there on this, if that makes sense.
Now, there is an interesting question that often pops up and it relates to what happens if a consumer fills out an online portal and puts information there but doesn't hit the submit button. What do we do? Well, Frequently Asked Question Number 1 from the Truth in Lending RESPA Integrated Disclosure Frequently Asked Questions in the section “Providing Loan Estimates to Consumers” goes on to tell us that if a customer starts filling out a form online, enters the six pieces of information that constitute an application for purposes of the TRID rule, so there's six pieces of information we're talking about here, but then the consumer saves the form to complete at a later time, the consumer has not submitted the six pieces of information, that constitute an application for purposes of the TRID rule, because they have not submitted the application online. So just because the information is there in your online system, if they have not hit the submit button, you're not required to go in and see which consumers have the six pieces of information in order to start your clock and send a Loan Estimate. You can wait for them to hit the submit button and then that would start your clock.
So that's all I have today for this Compliance Clip.