I thought the mailbox rule applies? If I understand correctly, the disclosure would be considered to be delivered within three days of mail.

There is no mailbox rules in the constitution:

(D) the lender provides the owner the following written notice on a separate document not later than the third business day after the date the owner submits the loan application to the lender and at least 12 days before the date the refinance of the extension of credit is closed:

This provision regarding the rate/term refinance is in the proposed rules, but those rules won't be effective until, at the earliest, early March:

(C) If a lender mails the refinance disclosure to the owner, the lender must allow a reasonable period of time for delivery. A period of three calendar days, not including Sundays and federal legal public holidays, constitutes a rebuttable presumption for sufficient mailing and delivery.

Notice that this is a rebuttable presumption. The lender gets a presumption that it was delivered in 3 calendar days, excluding Sundays and holidays, but the owner could prove that they didn't receive it. If you rely on the mailbox rule, can you withstand an owner's rebuttal that they didn't receive it or didn't receive it timely? Do you have evidence that the owner received the notice timely? What if they bring in a neighbor who testifies that the USPS delivered it to them and they didn't get it to the borrower for 2 weeks? Assuming the court believes the neighbor, your presumption was just rebutted. Just to get the point across, I like to think the neighbor is a nun.

We rely on the mailbox rule all the time, but typically it is relied on when the recipient has a duty to do something timely. For instance, when you sue some one, you mail them the papers, then they must file an answer by the Monday next after 20 days of receipt. Well, the mailbox rule means they have to file an answer by the Monday next after 23 days.

In this case, we aren't using the mailbox rule to determine when the recipient (borrower) needs to do something. It is used to determine when you can close. Get it wrong and you may invalidate your lien.

Depend on the mailbox rule at your own risk.

I tried to edit the above response after I posted it. There is no button for editing.

Just an FYI-- there is proposed guidance on the amendments that provides that there will be a mailbox rule. Of course, those proposed guidelines have to be adopted and we wont really know until March-- but wanted to make sure everyone was aware.

http://www.sos.state.tx.us/texreg/archiv...SECURITIES.html

If you are going to mail the notice required on a new rate/term refinance of a home equity loan, you need to get it in the mail the day you have an application. The proposed rule says the notice is presumed delivered within 3 business days of dropping it in the mail, and the notice must be provided (delivered) not later than the 3rd business day after receiving an application.

BTW: Application is defined NEITHER in the amendment nor the proposed interpretations.

REMEMBER: These are just proposed rules and likely will be adopted in March. Remember, they may change when adopted. Check the final rules before you act on any information you learn about the proposed rules.

What is everyone doing about this scenario?



The real conundrum is that you get an application for a standard refinance. You order the title commitment and five days later when it arrives you find out that their 1st lien loan is actually a 50(a)(6). Since the rate/term refinance 12 day disclosure has to be delivered within three business days of application - what do you do? Make them start over or tell them that you can only offer another 50(a)(6) loan and give them the 50(a)(6) 12 day disclosure which can be delivered anytime, as long as you wait 12 days after delivery to close?

JC, you figured it out. Give them the choice to start over or refinance as an A6.

Deny because you can't make the loan and end up with a valid lien? Then have the applicant re-apply?

Yes, or go with an A6. Not a great solution, but it's what we've got. I think some lenders may give the rate/term disclosure upon receiving an application for a refinance--just in case. I'm not sure I like that solution, but each lender needs to make its own decision.

I don't like it either because the opening statement in the disclosure is highly likely to be incorrect.

YOUR EXISTING LOAN THAT YOU DESIRE TO REFINANCE IS A HOME EQUITY LOAN. YOU MAY HAVE THE OPTION TO REFINANCE YOUR HOME EQUITY LOAN AS EITHER A HOME EQUITY LOAN OR AS A NON-HOME EQUITY LOAN, IF OFFERED BY YOUR LENDER.

....might leave the applicant scratching his/her head and wondering about the lender's competence. I am pretty sure my management won't like that route.

I know it might be a slippery slope but was thinking about having the lender document the file as to when the discovery was made that the existing loan is a home equity loan, give the disclosure, wait 12 days.

Oh wait........"document the file" by the lender............never mind.

Are you at risk for not perfecting the lien?

The failure to deliver the 12 day notice on a Rate/Term Refinance within three business days of application will (most likely) result in the lien being invalidated. That would be up to the judge, but that is the way these things usually go.

(f) A refinance of debt secured by the homestead, any portion of which is an extension of credit described by Subsection (a)(6) of this section, may not be secured by a valid lien against the homestead unless either:

(2) all of the following conditions are met:

(D) the lender provides the owner the following written notice on a separate document not later than the third business day after the date the owner submits the loan application to the lender and at least 12 days before the date the refinance of the extension of credit is closed:

So, if HE into a standard mortgage disclosures aren't final, and won't be until early March, probably - is anyone going ahead with the current proposed refi language now? With that product type now?

The disclosures are final, as they are in the actual Constitution. Only the proposed guidance is pending.

I read that HE loan interest will no longer be deductible. That will make these nasty loans less desirable.

Why do you consider these loans "nasty", Mr. Pale?