We accept applications for preapproval without a specific property address, but with a loan amount rate and program. We then complete the standard GFE/TIL RESPA disclosures, perform a preliminary underwrtite and issue a conditional commitment letter on the TBD property (to be determined).

Later, when a property is indeed identified, we redisclose the GFE/TIL at that time. Unfortnately our auditor has identified a few cases where our processing staff did not redisclose the GFE/TIL upon notification of a property. A review indicates in all cases, after the property was identified, the loan amount and rate were all equal to or lower than the original GFE/TIL provided with the original preapproval.

Our internal auditor has indicated failure to provide the GFE/TIL/RESPA disclosures (or in this case redisclosure) when the property is identified, is a an audit exception. I am of the opinion we have met the spirit of the regulation and have strived to provide the applicant with the estimate of costs and TIL disclosures. The simple addition of a street address has not changed our disclosures and not enhanced the value of the disclosure.

Any RESPA experts care to comment?
Thanks for your guidance!

Well, the finding does hinge around the definition of an application found in RESPA:

"3500.2(b) Application means the submission of a borrower's financial information in anticipation of a credit decision, whether written or computer-generated, relating to a federally related mortgage loan. If the submission does not state or identify a specific property, the submission is an application for a pre-qualification and not an application for a federally related mortgage loan under this part. The subsequent addition of an identified property to the submission converts the submission to an application for a federally related mortgage loan."

However, I agree with you from a practical standpoint. If the applicant is just going to receive the exact same information again, of what value does it add?? There is no requirement to identify the specific property being purchased on either the GFE or TIL.

I would argue that under 3500.7(a) that the timing requirement was met as the proper disclosure was provided not later than three days after the application was received.

"The lender shall provide the good faith estimate required under this section (a suggested format is set forth in appendix C of this part) either by delivering the good faith estimate or by placing it in the mail to the loan applicant, not later than three business days after the application is received or prepared."

I know of nothing in the statute or regulation with which they could counter that argue, as long as the original disclosures were accurate.

Randy said:


I absolutely agree. Ask you auditor to prove how the earlier disclosures don't meet the RESPA requirement.

Thanks to both for your feedback.

The auditor's question is focused on the fact that our initial application (and disclosure) without a defined property, is not really a subject to RESPA. Once we later have the address, it is a "formal application", a federally regulated mortgage loan, thus the three day disclosure is required from that point.

The auditor is discounting the fact we previously provided the disclosures.

Thanks again!

Your auditor is wrong - like David said - have them prove it. It only says "provided not later than three days after the application was received". If you provided it before the application was received, it is well within that timeframe.

Most loan officers could fill out a generic GFE for a $10,000 home equity loan right now. No borrower, no property, just typical fees for that type of loan. That's all the GFE is after - what do you expect this person to pay? You've provided that info, before the "application" was technically received. You've met the requirements of RESPA. RESPA does NOT require you to redisclose just because a property was identified.