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#1840661 - 08/08/13 03:54 PM Fair Lending and RESPA "Completed Application" Def
Norman Paperman Offline
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Norman Paperman
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Hello Kids,

I hope everyone is ready for the weekend! I am bringing up a question that I have previously discussed. I have one additional part that I want to clarify.
http://www.bankersonline.com/forum/ubbth...085#Post1832085


When defining "completed application" for Reg B, can I include credit report as a trigger?
Reg B Section F

When defining "application" for RESPA, can I include credit report as the seventh item?
Reg X, Section B

Here is the scenario. A mortgage customer gives all of their information and says "call me when rates hit x.XX%.".

We don't want to mark their application incomplete (assuming we use the six components of RESPA to define a Reg B "complete application")

We don't want to issue disclosures yet if the customer is clearly not ready to act on the current rates.

So, can I use "credit report" as the final trigger for RESPA and Reg B completed application?

Thanks for your help!
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Lending Compliance
#1840668 - 08/08/13 03:59 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
RR Joker Offline
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The Swamp
My opinion?

No
and
Absolutely No.
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#1840710 - 08/08/13 04:53 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Dan Persfull Offline
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Bloomington, IN
We don't want to issue disclosures yet if the customer is clearly not ready to act on the current rates.

The customer does not have to provide you an intent to proceed to trigger the GFE & ETIL requirements. However if they inform you to call them when the rate hits X then have they given you an intent to proceed once the rates hits X?


When defining "completed application" for Reg B, can I include credit report as a trigger?

You can but obtaining the credit report is out of the applicant's control. Therefore you have to exercise due diligence to obtain it. IOWs, there would be no viable excuse for you to consider an application incomplete when obtaining the credit report is your responsibility and in most cases can be obtained in a matter of minutes.

When defining "application" for RESPA, can I include credit report as the seventh item?

RESPA addresses receiving an application. It does not address receiving a complete application. Even if you did require the credit report what would be your reasoning for not obtaining it once the other 6 pieces of information are obtained. Again it's your responsibility to obtain it.

So, bascially requiring the credit report before having an application would place the burden of obtaining an application on the bank performing the due diligence to obtain the credit report; because obtaining it is outside the applicant's control and they would have no way of meeting your application requirements.
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#1840731 - 08/08/13 05:20 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Norman Paperman Offline
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Norman Paperman
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Thanks Dan. Let me know if I am digesting this correctly...

If we use RESPA 6 as our criteria for a completed application (Reg B)...

Customer provides a completed application on 8.8.13 and says "don't do anything until rates hit 1%.". In order to keep from violating my 30 day decision rule, could I add "signed intent to proceed" as my trigger for my "complete application" under Reg B?

This would keep me from violating the 30 day decision rule.

Could I also require a "signed intent to proceed" as a 7th item under RESPA?

My MLO's have a lot of people who will apply and say, just wait until....

I need to find a way to keep these things compliant.

If all of this sounds a bit off, I would appreciate some practical tips.
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#1840752 - 08/08/13 05:31 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Dan Persfull Offline
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In order to keep from violating my 30 day decision rule, could I add "signed intent to proceed" as my trigger for my "complete application" under Reg B?

I suppose you could, BUT - if you did not receive that signed intent within 30 days of receiving the "incomplete" application you have to either send an AAN denying them for an incomplete application or send them a notice of incompleteness under the requirements of 1002.9.

Could I also require a "signed intent to proceed" as a 7th item under RESPA?

Absolutely not. Under RESPA the only thing the intent to proceed affects is when you can start collecting fees.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1840757 - 08/08/13 05:35 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Norman Paperman Offline
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Thanks Dan. So here is what I have...

My Reg B definition of "completed application" is RESPA 6

My RESPA received application is RESPA 6

What do I do about the guys that say "call me when rates hit 0% (see how it keeps getting lower)."?

Thanks
Last edited by Garret01; 08/08/13 05:36 PM. Reason: edited to show my thanks for your time
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#1840769 - 08/08/13 05:45 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Truffle Royale Offline

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Too many rules and regs with time restaints in place now. You can't just take applications and stuff them in a drawer to wait for that mythical 0% rate to appear.

As Dan pointed out, you get the application, you do the disclosures, incomplete notice, AAN, whatever.

If Mr Smith calls and says 'call me when the rate hits 0%' then call him when the rate hits 0% and take his application at that time.

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#1840775 - 08/08/13 05:51 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Dan Persfull Offline
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We don't get many of these but when we do we provide the GFE & ETIL based on the current rate along with a cover letter informing them what information we need to complete the application and by what date we need it or no further action will be taken. Remember the GFE is not a commitment and by providing the cover letter we also take care of our Reg B notification requirement.

If they don't provide the intent to proceed within 10 business days of the GFE then we are free to issue a new GFE when they provide their intent.

If the rates do hit the target and they provide their intent within the 10 days then generally there is no reason to issue a revised GFE. The rate section of the GFE is not subject to any tolerance. So, as long as it is accurate at the time the GFE was provided there should be no regulatory issues. Also, when this happens the applicant will generally lock the rate which at that time we are required to issue a revised GFE which allows us to revise the information directly affected by the rate lock.
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#1840783 - 08/08/13 06:01 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Norman Paperman Offline
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So IF John Doe applies(lets say online) and says contact me when.. (assuming we have the RESPA 6)


We issue the GFE/ETIL based on the current rate at that time. We also include a cover letter stating that if he fails to lock a rate within X days, then his file will be incomplete and no further action taken.

Then tell my MLO to watch rates and call the guy when they hit the target.

Thank you both for your time. I hope you compliance veterans realize the service you are providing to others.

I hope this thread has/will help others with my same dilemma.
_________________________
Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.


CRCM

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#1840788 - 08/08/13 06:09 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Dan Persfull Offline
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I'm not sure I would use locking the rate as one of the conditions since that is disclosed on the GFE. Our cover letter lists some standard underwriting information we always need and it also requires pre-payment for the appraisal by the date specified.
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#1840804 - 08/08/13 06:32 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Truffle Royale Offline

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I agree with Dan that making the borrower lock within x days is not a good determining factor for incomplete.
Cover letter here states things like pay-stubs and other items the borrower would provide.
It has the drop dead date.
Often times, we'll receive some of the items but not enough to make a decision but we have documentation that shows we're not simply ignoring the loan for 30 days waiting for a specific interest rate to become available.

Another side to this coin, the best rates are usually available for the shortest lock periods. Maybe it would be better to get your LOs to get the application going and even approved and then wait for the preferred rate. Appraisals need a recert after four months (a charge you could pass on to the borrower via a valid CC/redisclosed GFE) but they're good for a year. Title insurance is usually good for 3-6 months. You can rerun a cbr and update other docs too. So, if the loan is approved and ready to pull the trigger, your borrower could snap up a 15 or 30 day lock with no worries about rushing other stuff to close on time.

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#1840912 - 08/08/13 08:42 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Norman Paperman Offline
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Game plan is in place now. Thank you both for your help! Have a great weekend!
_________________________
Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.


CRCM

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#1840932 - 08/08/13 09:36 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Texas Banker Offline
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Posts: 16
Dallas, TX
I have a similar situation. Our LO accepted a complete application for a pre-approval. We do not have a pre-approval program. I am not sure how to handle the application, we haven't pulled a credit report. Do we need to send the GFE and ETIL? They are not applying for a loan at this time, we can't deny something they aren't asking for. I am sightly confused on how to handle this. Any help is appreciated.

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#1841024 - 08/09/13 01:42 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Dan Persfull Offline
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Bloomington, IN
Review 1002.2(f) and its Commentary. In the Commenatary pay particular attention to (4) & (5).
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#1841112 - 08/09/13 03:00 PM Re: Fair Lending and RESPA "Completed Application" Def Norman Paperman
Texas Banker Offline
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Dallas, TX
Thank you Dan, this was very helpful information.

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