E-mail and the "Mailbox Rule" with TRID
Here's an issue that maybe is popping up for you during TRID implementation.
So you're going to make greater use of electronic delivery to speed things up and lessen the effects of TRID on your closing speed. Good idea! But how does it work exactly? I know the borrower needs to receive the Closing Disclosure three days before closing. And if I send that by regular mail, I need to add an extra three days for the "mailbox rule." But what if I deliver it electronically?
"Mailbox Rule" - General Rule
The Mailbox Rule isn't a banking compliance thing. It's been around for hundreds of years. It basically just says that, whether it's a legal contract or important disclosure, we can legally presume the other person receives it 3 business days after we place it in the mail (correctly stamped and addressed).
It lets us do business across cities and states - without handing it over in person. And this is also why it's a Federal crime to open someone else's mail!
The Closing Disclosure - Regular Mail
So we have to prove the borrower "received" the Closing Disclosure three days before closing. How can we do that? Do we have a video camera set up to see if they actually open their mail and read it? No. We rely on the mailbox rule and can presume they received it three business days after we place it in the mail.
The Closing Disclosure - E-Mail
While the Mailbox Rule normally helps us, we don't want to wait three full business days for mail for delivery of the Closing Disclosure. We want to get that clock started right away! If you can't deliver it in person, you'll want to deliver it electronically - to a borrower's e-mail account from your LOS or other system.
But the Mailbox Rule actually works against us here, at least potentially, because it applies the same to e-mail as it does to regular mail. That means, that even though e-mail should be instantaneous, we still have to wait 3 business days to presume they have received it! That is, unless we can prove they received it earlier.
So how do we prove they actually received it? (not just that we delivered it, forcing us to wait 3 days) The delivery systems will work just like a Read Receipt on e-mail, and will track when the borrower downloaded the disclosure itself. THIS is the proof you need to show receipt. You do not need the borrower to sign it and return it, the system should do a perfectly good job of this by itself.
But you do need the borrower to actually open it! If you deliver it by e-mail, but never receive the notification that the borrower downloaded it, you'll have to wait the full three days for the Mailbox Rule! So remember to remind borrowers to open disclosures as soon as possible - and if a closing is on a tight schedule, make sure to call the borrower to remind them to open it up and read it.
As a special note, there is one more good thing to know about the Mailbox Rule here. If you deliver the Closing Disclosure by e-mail, and the borrower never opens the e-mail, you will have actual proof that they NEVER received the disclosure. Do you need to give it to them by mail or do anything else? No. You can 100% rely on the Mailbox Rule (although you do have to wait 3 days) and presume they received it after waiting.
Example
Borrower consents to receive disclosures electronically at application. He was hesitant at first, but his loan officer let him know- "Hey, we can do this through regular mail, but we have a LOT of documentation to get out to you, and this process will be quicker and easier if you give us an e-mail address."
Borrower wants to close on Thursday, we disclose the Closing Disclosure to Borrower by e-mail on Monday. If Borrower opens the e-mail with the Closing Disclosure on Monday, that starts the clock, and we can close on Thursday, as requested. BUT- if Borrower waits and opens the Closing Disclosure on Tuesday, there's nothing we can do- the earliest we can close is Friday. AND- if Borrower never opens that e-mail, we can still close without doing anything else- but it won't be on Thursday, and it won't be on Friday, and it won't be on Saturday- we'll have to wait the full three mailing days (Mailbox Rule) and then the three days for TRID. Yikes!
In other news:
For real compliance nerds out there, the CFPB Director Richard Cordray issued his first appellate decision (yes, you appeal CFPB decisions to the Director, just like the NFL). Summary available here.
Speaking of the CFPB, the National Mortgage News ran a story with the quote - "It's like getting a Mexican drug lord to run the DEA." - in regards to the CFPB's alleged problems with workplace discrimination. I get that we like making fun, but that sounds a little extreme, no?
Have you heard of Earnest? It's a very interesting loan company, which intends to give small loans to young people with thin credit files (trying to fight against the debated credit scoring requirement that in order to have good credit you have to take out loans ... punishing people who don't use credit cards). Too much to say in this little blurb, but Earnest may be tops of many new innovative tech companies out trying to disrupt the lending business.
Speaking of technology, innovation, and lending - Stratmor makes some good points in this blog post from a couple of months ago.
"Men acquire a particular quality by constantly acting in a particular way."
- Aristotle
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