Intent to Proceed

We do not collect any fees until closing. Are we still required to obtain and document intent to proceed? Our procedure has been if they sign and return the early RESPA documents that is their intent that they want to proceed with the loan.

Any insight would be helpful as we have auditors:)

Intent to proceed is a standalone requirement and must be obtained regardless of fee collection, etc. You need a document from the applicants or something by a bank employee memorializing a conversation with the applicants.

We send a form out with the early disclosure that the borrowers sign if they wish to proceed with the transaction.

KayBee, in your opinion, is it required or "best practice" to obtain "a document from the applicants or something by a bank employee memorializing a conversation with the applicants"?

Thanks

You need evidence in file.

Not that it has anything to do with the regulation, but why would a lender go ahead an incur the costs involved in proceeding (appraisal, title work, etc.) without an express intent to proceed from the applicant? Incurring all those costs "on spec" just doesn't seem reasonable to me (and I freely admit I am not a lender myself).

ADN, what does the cover letter you send out with the earlies say?
Ours has a line that reads 'by signing and returning the enclosed documents you are acknowledging your intent to proceed with this loan.'
This should be sufficient for your examiners.

Some of our lenders merely write "Proceed" across part of the application. I've never thought this was a best business practice, but have been told to accept it. What are your thoughts on this kind of practice?

Also, doesn't the date to proceed have some kind of relevance? Lock or something?

Just writing proceed means nothing, imho. You need a date and initials to indicate who said what to whom when. Who's telling you to accept it? I'm betting it's an LO and not anyone who would have to sit and explain to an examiner.

Yes, the date to proceed has all kinds of relevance but nothing to do with the lock. I suggest you grab the RESPA FAQ and start reading. You'll get to the significance of the intent to proceed within the first few pages.

Yes, I need to, it's been a while since I've read through the FAQs--are they still from 2010?

The RE dept says if the loan closes, the borrower intended to proceed! I've never been able to convince anybody we need to put it into writing with a signature just to be safe.

The intent to proceed must occur before the bank starts requiring documentation of income, imposing fees, etc. If you can't demonstrate that you had an intent to proceed from the borrower, you can be cited.

Retrospective Intent to Proceed (well the loan closed, didn't it?) gets the bank nothing. No fees should have been charged, the closing should not have happened, without a documented intent to proceed.

I totally agree! As I start my RESPA audit, I wish I had some evidence of banks being cited because no documented ITP. Are you aware of any?

If that logic worked, we'd never have a right of rescission error or many others violations.

Tell them this: "Congress gave borrowers this right (no verifications or fees until intent to proceed is demonstrated). You can't take people's rights away from them." Like it or not, it's the law. Stupid or not, it's the law.

So, what would you consider evidence of intent to proceed? I don't want add yet another piece of paper to the file, and the law doesn't explicitly say get it in writing, but rather the borrower expresses intent to proceed.

You have two choices: either another sheet of paper or a required consistent method of documenting verbal consent.
As many of us know too well, putting 'required consistent' and LO together is about as big an oxymoron as jumbo shrimp.

But the paper doesn't have to be separate. You could add a line to the cover letter you send with the GFE/TIL and other earlies that reads: "By returning the items requested here, you are indicating your intent to proceed with this application."

Do you not use a disclosure letter? We use the following and I know others use something similar. The 0s are check boxes. Once the applicant provides us the check for the appraisal they have given their intent to proceed.

Borrower
Co-Borrower
Address
City State Zip

May 19, 2014

Dear :

Thank you for choosing The Peoples State Bank for consideration of your home financing needs.

We are providing, or have already provided you the following disclosures to help explain the terms of the proposed financing. If you have any questions after reviewing these disclosures please contact me and I will be glad to go over the details with you.

0 The Preliminary Truth-In-Lending Disclosure
0 The Good Faith Estimate
0 Written List of Settlement Service Providers
0 Servicing Transfer Disclosure
0 Notice of the Right to Receive Copy of Appraisal
0 HUD’s booklet “Buying Your Home”
0 The Notice to Home Applicant / Credit Score Disclosure
0 Homeowner’s Counseling Notice
0 Federal and State Sales of Insurance Disclosure
0 Notice to Borrower / Prospective Borrower (form HPU-01) as required by Indiana Code 24-5-23.5-8(a))
0 The Peoples State Bank’s Privacy Disclosure

If your proposed financing is an Adjustable Rate Mortgage (ARM) the following disclosures have been or are being provided:

0 HUD’S booklet “Consumer Handbook on Adjustable Rate Mortgages (ARM)”
0 Our 1-1, 3-1 and 5-1 Adjustable Rate Mortgage Disclosures

If after reviewing these disclosures you wish to proceed with the loan request please return your check for $375.00 to cover the cost of the appraisal in the enclosed envelope. If we do not receive your check on or before _______ we will assume you have chosen not to proceed with the loan request and no further action will be taken.

We look forward to serving your home financing needs.

Sincerely,

Ok, great, I'll see about this. Thanks to all for your help.

Where do you find in RESPA that it is regulatory to wait for the intent to proceed prior to requesting income documentation? I cannot find this citation.

The lender is not permitted to require, as a condition for providing a GFE that an applicant submit supplemental documentation to verify the information provided on the application. [§1024.7(a)(5)]

…such a requirement may inhibit borrowers from shopping for the best loan by leading borrowers to believe that they are committed to obtaining a loan from that loan originator… [RESPA FAQ – GFE General #31]

After a loan applicant both receives a GFE and indicates an intention to proceed with the loan covered by the GFE, the loan originator may collect fees beyond the cost of a credit report for origination-related services. [RESPA FAQ – GFE General #10]

If after reviewing these disclosures you wish to proceed with the loan request please return your check for $375.00 to cover the cost of the appraisal in the enclosed envelope. If we do not receive your check on or before _______ we will assume you have chosen not to proceed with the loan request and no further action will be taken.

When using this verbiage in your cover letter, how would you track this the application for HMDA if the customer does not get back to you - as a withdrawn application or an incomplete appllcation?

Only the applicant can expressly withdraw an application. If we don't hear from them within the allotted time we report it as closed for incompleteness.

Thank you!!