I just to make sure that I am correct in my understanding of Regulation Z in the fact the in a closed-ed consuemr transaction secured by a principal dwelling, tha non-borrower consumer (i.e., occupies the residence but not on the loan obilgation) must receive a copy of the TILA disclosures and the right to rescind. However, the non-borrower consumer is not required to receive the early TILA disclosures required under 226.19 (a), correct?

All consumers who have the right to rescind must receive a copy of the ETIL. 226.17(d).

Follow-up Question- If they are required to be given the ETIL, is it required that the waiting periods apply to the non-borrower consumer as well or can you give the eTIL to the non-borrower consumer at closing?

Basically, I am trying to figure out the situation that due to title work, we find that there is another property owner on a rescindable transaction. Would we be required to send out the initial TIL disclosure and wait the 7 business day requirement under 226.19(a) as it relates to this non-borrower consumer?

I suspect that we do not and only have to ensure that a copy of the TIL disclosure is provided to the non-borrower consumer at closing?

How does giving someone the early TIL at closing accomplish amything??

That is not a correct assumption. The waiting period applies to all consumers who are entitled to receive the disclosure.

In doing research, I found this memo online issued by an attorney's office in Texas. So based on your analysis above, this information is incorrect?



This memorandum addresses the following question: “When must a non-borrower coowner (i.e., spouse or separate co-owner who occupies the dwelling) receive a copy of the TILA disclosures for a loan rescindable under Section 226.23 of Regulation Z?”

Section 226.23 provides that a closed-end consumer transaction secured by a principal dwelling is subject to a right of rescission by the consumer. Section 226.23 also requires that the consumer must receive one copy of the TILA disclosures and two copies of the right to rescind and has until midnight of the third business day thereafter to rescind the transaction. For rescission purposes, Section 226.2(a)(11) expands the definition of consumer to include a non-borrower owner of the property who occupies it as a primary residence (herein referred to as the “non-borrower consumer”). In Texas, “non-borrower consumer” also includes a non-titled spouse. Thus, if either the consumer-borrower or the non-borrower consumer does not receive a copy of the TILA disclosures or two copies of the right to rescind, each have up to three years to rescind the transaction.

Prior to the new early disclosure rules of Section 226.19(a) on July 30, 2009, Regulation Z permitted the consumer-borrower and the non-borrower consumer to receive one copy of the TILA disclosures and two copies of the right to rescind at closing. With the advent of these new early disclosure rules, the question arises when the non-borrower consumer must receive the TILA disclosures required by Section 226.23. I recently discussed this with a senior staff attorney in the Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, and was informed that their position is the early disclosure rules required by Section 226.19(a) do not apply to a nonborrower consumer in a rescindable transaction because the purpose of these early disclosures is for loan shopping, and the non-borrower consumer is not loan shopping. This means the TILA disclosures required by Section 226.23 to be given to the nonborrower consumer may still be given to the non-borrower consumer at closing, notwithstanding the early disclosure requirements of Section 226.19(a).

Therefore, this is to advise you that in a rescindable transaction, if you are relying on: (i) the “initial” TILA disclosure given within 3-business days of loan application or (ii) the “corrected” TILA disclosure received by the consumer 3-business days prior to closing, and you have not provided a copy of the disclosure to the non-borrower consumer at that time, you must provide the disclosure to the non-borrower consumer at closing.

I have to agree with the attorney. The early TIL has never been considered one of the "material" disclosures for RofR purposes.

From the original final HPML regulation preamble:

Enhanced civil remedies and redisclosure. The Board proposed the early mortgage loan disclosure pursuant to its authority under TILA Section 105(a), 15 U.S.C. 1604(a). Consumer advocacy groups generally support the early mortgage loan disclosure, but urged the Board to allow for civil enforcement to ensure compliance. They argued that without enhanced remedies, the disclosures could become instruments for “bait and switch” schemes. Specifically, consumer groups urged the Board to use its authority under TILA Section 129(l)(2), 15 U.S.C. 1639(l)(2), in addition to Section 105(a), and declare that failure to deliver timely and accurate early disclosures is an unfair and deceptive practice subject to enhanced damages under Section 129(l)(2). Consumer groups also argued that the early mortgage loan disclosure should be considered a material disclosure subject to remedies available under TILA Section 130(a)(4), 15 U.S.C. 1640(a)(4) and extended rescission rights.

The Board is adopting the final rule as proposed, pursuant to its authority under TILA Section 105(a), 15 U.S.C. 1604(a). The early mortgage loan disclosure is an early good faith estimate of transaction-specific terms, such as the APR and payment schedule. Although the Board shares commenters’ concerns about bait and switch tactics, responsible creditors may not know the precise credit terms to disclose, and therefore must provide estimates, because the disclosure must be provided before the underwriting process is complete.

Wow...great information. So the Board does not consider it a material disclosure based on that premable...I am wondering if this is open to interpretation and therefore, to err on the side of caution, give the early TIL to the non-borrower owner with the required waiting periods, or print this down for purposes of preparing an argument to an examiner and go with the fact that an early TIL does not have to be provided in this situation?

I also agree with the attorney in regards to the material disclosures but how did this thread move from the requirements of the ETIL to the requirements of the material disclosures?

They are two entirely different requirements. And for MDIA (not HPML) there is a waiting period before the loan can move to closing based on the timing of when the ETIL was provided to all consumers entitled to receive it.

And I have seen no FRB opinion rescinding the requirements of 226.17(d).