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CFPB RESPA/TILA Rule Reference: 6.6-6.7, page 30-31, CFPB detailed summary of the rule 

We all know that in life things change, and the lending industry is no exception. But for today’s post, let’s ask ourselves:

What happens when things change during the three-business-day window in which lenders are supposed to deliver the Loan Estimate?

The TILA-RESPA Integrated disclosure rule provides two primary scenarios that define what happens if things change during this window:

1. Lender determines the consumer does not qualify

  • Lender does not have to submit Loan Estimate

2. Consumer withdraws the application within the window

  • Lender does not have to deliver the Loan Estimate.
  • HOWEVER, if the lender eventually completes the deal under the original terms submitted by the lender then they have violated the Loan Estimate rule by not delivering the Loan Estimate during the original window.

So to reiterate, if the consumer withdrawals the application, you cannot deliver that requested loan to them in the future if they decide to move forward. If the lender does issue that loan, the lender will have violated the Loan Estimate requirements under Regulation Z.

This will cause major headaches for lenders because there will be a necessity to keep track of who has been sent Loan Disclosures, what the reason was given for the loan application being cancelled, and some way for a flag of sorts to go up when the same customer comes back later to re-initiate the process.

How would this affect your company as it does business today? Are you already tracking such specific details with your technology solutions?

As a follow up to yesterday’s post, be sure to join the conversation by posting a comment or learning more at the TilaRespa Knowledge Center.

All information and views expressed or implied are provided without warranty and are only the opinion of Pavaso, Inc. Each participant should seek legal representation for legal interpretation of the ruling and the CFPB directly for final instruction and interpretation. The final rule can be found here.