Electronic Delivery of LE

Posted By: Likes to Comply

Electronic Delivery of LE - 06/22/21 01:45 PM

We have a electronic delivery module with our loan software. An email is sent to the customer with a link to the documents. We also call the customer and give them a password to enter once they click the link. From there they are presented with a eSign agreement and can choose to accept or decline. If they accept, they can review and acknowledge the documents sent to them.

On 6.16.2021 the email was sent to the applicants. The audit trail shows they opened the email. However, they did not actually accept eSign consent and access the early documents until 6.22.2021. They were scheduled to close on 6.29.2021.

The consummation rule is that the LE must be delivered or placed in the mail at least 7 business days prior to consummation.

Do we count from 6.16.2021 and close on time; or count from 6.22.2021 and have to postpone the closing date?
Posted By: Dan Persfull

Re: Electronic Delivery of LE - 06/22/21 01:56 PM

One date you left out is the application date.

The LE has to be delivered/placed in the mail within 3 business days of receipt of the application. It does not appear based on the information provided the LE was delivered within that 3 business days. That is why most systems have a follow-up warning to let you know the consumer has not consented to electronic documents within the time allotted so you can get the paper disclosures in the mail.

IMO the LE was not delivered until 6/22/2021 so you can't close until 6/30/2021.
Posted By: Likes to Comply

Re: Electronic Delivery of LE - 06/22/21 02:26 PM

Are basing your response on the fact that eSign consent had not yet been obtained so we cannot even consider something as being mailed or delivered until eSign consent is obtained?

In the rules there are times when delivered/mailed is required as opposed to when something is considered to be received.

We received the application on 6.11.2021. We are closed on Saturdays. We sent the email to the customer to access the early docs on 6.16.2021. We always considered that as being "placed in the mail" within 3 business days of receiving the application. Additionally, we have an electronic audit trail that shows that the email was delivered on 6.16.2021 and opened. The customer just chose not to go further to review the documents. How is that different than if they received it in the U.S. mail but didn't look at it right away?

1026.19(e)(1)(iii) – 2. Waiting period. The seven-business-day waiting period begins when the creditor delivers the disclosures or places them in the mail, not when the consumer receives or is considered to have received the disclosures. For example, if a creditor delivers the early disclosures to the consumer in person or places them in the mail on Monday, June 1, consummation may occur on or after Tuesday, June 9, the seventh business day following delivery or mailing of the early disclosures, because, for the purposes of § 1026.19(e)(1)(iii)(B), Saturday is a business day, pursuant to § 1026.2(a)(6).

The 7 day waiting period rule says it begins when the creditor delivers the disclosures or places them in the mail, not when the consumer receives or is considered to have received the disclosures.

So based on all of this, didn't we meet the 3 day timing for delivery/mailing of the LE and aren't we ok to close on 6.22.2021 because we delivered/mailed the documents on time?
Posted By: rlcarey

Re: Electronic Delivery of LE - 06/22/21 02:43 PM

If the LE and other initial disclosures were not delivered via an E-Sign compliant process - meaning that you received demonstrable consent before delivery, it was like you just dropped those disclosures in the trash can.
Posted By: Inspector

Re: Electronic Delivery of LE - 06/22/21 03:24 PM

I don't believe it is appropriate to cross e-sign delivered disclosures with the snail mail elements of the regulation. The problem in the scenario you are describing is that if consumer receives the email but never goes through the necessary e-sign steps then, as noted above, it is as though the disclosures were never received. Institutions I have seen use this type of process have an alert such that if the consumer does not complete the e-sign process then physical copies will be placed in the mail. Alternatively, for institutions with online applications, the e-sign process is handled through the application process so the consent has already been received.

So my take on your scenario is that the disclosures will not have been "delivered" or "received" for the consumer until the e-sign process is complete as emailing and placing in the mail are not the same within the regulation.
Posted By: Likes to Comply

Re: Electronic Delivery of LE - 06/22/21 03:43 PM

Turns out they actually had obtained eSign consent at application and the eSign agreement is for all communications, disclosures, etc. provided for the requested transaction. But due to system constraints, the eSign acceptance is re-presented every time something is sent.

So we had eSign consent on 6.11.2021. The early documents were sent on 6.16.2021. The customer didn't access the documents until 6.22.2021. But since we had permission on 6.11.2021 to delivery documents electronically, we can count the 6.16.2021 delivery date. The LE 3 day and 7 day consummation rules are based on delivery, not receipt, so we are ok to close on 6.29.2021 assuming the customers actually access/view the electronically delivered CD by 6.25.2021 since we have to have evidence of receipt or else the mailbox rule applies.

Posted By: Likes to Comply

Re: Electronic Delivery of LE - 06/22/21 03:47 PM

Sorry, mailbox rule would apply to 7 day rule but could still close on 7.29.2021.
Posted By: rlcarey

Re: Electronic Delivery of LE - 06/22/21 03:52 PM

Then you met your three day delivery requirement on the LE after application and your loan can close no earlier than June 25th, as long as they receive the CD today. The seven business days is counted backwards from the closing date and is based on the date the LE is delivered, mailed, or made available to the consumer via a E-Sign compliant system to which the borrower had already agreed to use.