Hello everyone,

I have a strange question I am researching.

I have been asked if we can increase our standard application fee and offer a discount if the consumer bring a full financial package in at application. This is in an effort to decrease processing times and encourage the applicants to bring all the information in up front.

I have a number of concerns here... primarily if there will be issues complying with 1026.19(e)(2)(iii). According to Comment 19(e)(2)(iii)-1, the Bank may collect from the consumer any information that it requires prior to providing the Loan Estimate before or at the same time as it collects the information which constitutes an application under Section 1026.2(a)(3)(ii). My concern is we will receive an application and an LO will not input something so the consumer can get a discount, which would violate the reg and mean our disclosures would be issued outside of compliance.

Furthermore, I have asked them if there is a grace period or not (meaning if an applicant comes in and sits down/fills out an app but doesn't have their financials, do they have a certain period of days to bring them in).

I'm also worried it could be construed that we are requiring additional information prior to producing a Loan Estimate.

Thoughts? Has anyone ever heard of something like this?

It's definitely Monday morning!

I think the key there is the use of the terms "may collect" vs. "require". IMO that means you can request whatever you want but you can't withhold issuing disclosures under 1026.19(e)(1)(i) and the consumer is in no way obliged to give you anything more before disclosures are issued. I think 1026.19(e)(2)(iii) makes that pretty clear - "The creditor or other person shall not require a consumer to submit documents verifying information related to the consumer’s application before providing the disclosures required by paragraph (e)(1)(i) of this section".

I see so many red flags and pitfalls in this.

You want to pay the borrower for information that cannot be required as a prerequisite to giving the LE. How are you going to spin that so an examiner swallows it?
What is the criteria going to be for a full package and who's going to make that decision on each?
Is close enough going to be good enough to receive the discount?
What about people who don't know about the discount and just walk in to apply? They can't get it because they didn't know?

I wouldn't touch this with a ten foot pole.

That is basically my line of thought as well Truffle....

This is like walking through a mine field. I said I would do my research and bring it to a meeting...

It may sound -- to some people (such as your lenders) -- like a terrific idea, but it depends so much on the planets and stars aligning just so before the customer is eligible for the discount, and the last thing you want to do is get caught hiding one of the six elements of an application to give the customer a couple of days to pull together the four or five other documents you need to call it a "full financial package). There are too many negatives and so little that's positive here that I'd shoot it down before the suggestion gains any traction with management.

Thanks John! Definitely trying to put this idea down quickly. Appreciate it!!!