"Application" saved but not submitted on POS -- need Loan Estimate or no?
Anyone have any Ability-to-Repay or Loan Officer Compensation work for me? I received an "I survived TRID" t-shirt in the mail from a friend this week, but I say it's too soon to tell!
Since we're still seeing this as a Question Mark in audits and flagged for further research in compliance management reports, I thought we'd address one seemingly ambiguous TRID issue that has actually been made clear.
Question:
If a consumer starts filling out a mortgage application online, and fills in those magic 6 pieces of information, but does not actually submit the application to the lender, does that trigger our obligation to disclose a Loan Estimate?
Short Answer:
No, it does not.
Long Answer:
An "application" triggers our obligation to deliver a Loan Estimate.
According to TILA, an "Application means the submission of a consumer's financial information for the purposes of obtaining an extension of credit." (1026.2(a)(3)(i)).
So the simple explanation for why we don't have to deliver a Loan Estimate is that the borrower did not submit anything yet. And this isn't just my opinion. The CFPB said so publicly in its August 2014 Webinar:
Question to CFPB Official: Great, thanks Andy. How about online applications? What if the consumer starts filling out an online application and saves it with the six pieces of information entered, but has not yet submitted it to the creditor?
Answer from CFPB Official: Thank you. The treatment of online application systems, and in fact this specific question, was considered and addressed in the Preamble to the Final Rule. For section by section, the page cite is 79768 of the Federal Register Notice [78 Fed. Reg. 79730, 79768 (Dec. 31, 2013)]. There it says, and I am quoting: "Because the definition of application refers to the submission of the six pieces of information, if the consumer starts filling out a mortgage application form online, enters the six pieces and then saves the mortgage application form to complete at a later time, the
consumer has not submitted the items of information." In other words, so long as the consumer has not submitted the six application elements, and again that is along with any other information that [the creditor] collects along with the six elements, to the creditor for purposes of obtaining an extension of credit, we do not view that a creditor is under an obligation to produce a Loan Estimate at that time. As the Preamble notes, this would include an online application where the six pieces are entered and saved but the consumer has not yet submitted it to the creditor.
So there you have it. One less thing to worry about. No need to troll open POS applications for the 6 pieces of information. Next!
In Other News:
Did you see the CFPB's latest attempt at guidance on construction lending? There were some interesting parts, such as potentially showing holdbacks in Section H. -- would still like to see more from them.
Eastern Bank approving small business loans in under 5 minutes?? Forget the Rocket Mortgage ...
"Good" reading here from the B&T on what lenders are doing on whether to reissue the Closing Disclosure post-closing or not
"Thank you, the carpool lane, for reminding people stuck in traffic that they also don't have any friends." Jimmy Fallon thank you note
Are you pro-arbitration or anti-arbitration? Settling a legal dispute with an employee, consumer, vendor, or other party can take years and millions in legal fees. It often takes more than 3 years in court to get a decision. The process is public, risky, and the appeals process can go on seemingly forever. Many industries have turned to greater reliance on mandatory arbitration agreements. You'll find this in many employment contracts and consumer products (check out the legal disclosure next time you buy a microwave or laptop computer).
Arbitration is potentially an alternative path to settling such disputes. It is faster, more private, and typically less expensive than the formal legal system. Essentially both parties can agree to have an arbitrator (rather than judge) settle a dispute through an informal (relatively) process. An important feature of arbitration is that there is no class action option (whether that is good or bad depends on who's asking).
The proposed benefits of arbitration are easy to see. Let's settle this dispute today rather than spend millions of dollars and years of our life in the court system.
But there are certainly opponents to arbitration, the Consumer Financial Protection Bureau being among them. Opponents argue that arbitration can be abused and is generally biased towards big corporations. Ever see an arbitration clause where the consumer is required to attend arbitration in Michigan, or Utah? I'm not traveling to Utah to force Samsung to take back my refrigerator! (Or even to force Bank of America to reduce my mortgage payment.) Unlike the court system, the arbitration business is just that, a business - businesses need profits. If Samsung requires every consumer dispute to be settled in ABC Arbitration in Michigan, you don't think the arbitrator is going to be at least a little biased toward Samsung?
Here are some quotes from the CFPB link above to show how they feel about arbitration:
"Consumers are signing away their legal rights"
"Companies use arbitration clauses in consumer financial products to get a 'free pass' to block consumers from suing"
Companies use arbitration agreements to "evade accountability"
Yikes! Hey, I'm just saying that arbitration might be getting a bad rap here. But I guess
"Far and away the best prize that life offers is the chance to work hard at work worth doing."
- Theodore Roosevelt
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