Compliance Blog

Sep 14, 2020
Categories: Home-Secured Lending

The Truth About Mortgage Disclosures: No Signature Required

With mortgage rates at historic lows, many credit unions are seeing an increase in mortgage application volume and credit unions are looking for ways to speed up their processing times. Some credit unions attempt to decrease their mortgage turn times by going digital, as discussed in a blogs regarding online applications and electronic signatures. Other credit unions try to make the process easier by determining which of the many disclosures must be signed, and if those signatures must be obtained upfront or can be done throughout the process or at the signing table.

Many of the mortgage disclosures provided to the member do not have a federal regulatory requirement for a signature. Rather, the regulations require that the credit union provide the disclosure, so in many cases it may be sufficient for the credit union to have procedures and documentation showing that the disclosure was sent. Even if there is no regulatory requirement for a signature, there could be secondary market considerations (such as if the credit union sells loans to Fannie Mae/Freddie Mac or other purchasers) as well as possible state law requirements.

Borrower’s Verification Authorization

None, because this is not a federally required disclosure. However, this disclosure may fulfill a third-party’s requirement to have signed consent to share information with the credit union.

Loan Estimate

None. Section 1026.19(e)(1)(iii)(A) requires the Loan Estimate to be delivered or placed in the mail “not later than the third business day” after the credit union receives an application, but does not have a signature requirement. The model forms have a signature line, which a credit union may use if it requires a Loan Estimate to be signed to prove receipt, which may advance the timeline for when the credit union could receive or send other disclosures such as the Intent to Proceed and/or Closing Disclosures.

Intent to Proceed

None. Once the member has received the Loan Estimate, section 1026.19(e)(2)(i)(A) states  they may provide their intent to proceed “in any manner the consumer chooses, unless a particular manner of communication is required by the {credit union].” The official interpretation states “oral communication over the phone, written communication via email, or signing a pre-printed form are also sufficiently indicative of intent.” The credit union may choose how it will accept an intent to proceed, but the credit union may want to have clear procedures in place because the regulation requires the credit union to document the member’s communication of intent to proceed.

Authorization to Pull Credit

None. Section 604 of the Fair Credit Reporting Act requires the credit union to have a permissible purpose to pull a credit report, which includes when the information contained in the report will be used in connection with a loan application, or when the credit union has written instructions from the member to obtain a credit report, neither of which the regulation requires a signature.

Uniform Residential Loan Application (URLA or 1003)

None, because this is not a federally required disclosure. However, this form is usually required by investors and the member’s signature provides a certification of the accuracy of the information and allows for the “owner of the Loan, its servicers, successors and assigns, [to] verify or reverify any information” related to the loan. Signatures on the URLA may also be sufficient for evidencing intent to apply for joint credit.

Joint Intent

None. The official interpretation to 1002.7 states that “a person's intent to be a joint applicant must be evidenced at the time of application… signatures or initials on a credit application affirming applicants' intent to apply for joint credit may be used to establish intent to apply for joint credit.” Signatures are just one way to show joint intent, however, it is common to receive signatures for joint intent as Appendix B’s model forms contain joint intent language, one of which is the URLA.

Notice of Right to Receive Copy of Appraisal

None. Section 1002.14(a)(2) requires the disclosure to be sent “not later than the third business day after the creditor receives an application for credit that is to be secured by a first lien on a dwelling.” For closed-end mortgages, this disclosure is incorporated into the Loan Estimate which, as noted above, also does not require a signature.

Privacy Policy

None. Section 1016.9 requires a credit union to provide notice to members about its privacy policies and practices in a manner that a member “can reasonably be expected to receive actual notice in writing,” but does not have a signature requirement.

Notice of Special Flood Hazard and Availability

This disclosure is only required to be sent to the member if the property is in a flood zone. Section 760.9 requires that the disclosure must be either signed or delivered in a way that can be documented that the member received it (such as certified mail, return receipt).

If the credit union decides to only require signatures on disclosures that are legally mandated to be signed, the credit union may want to update its internal procedures to reflect this practice and may also want to adopt procedures for documenting delivery of disclosures. If there is not a signature requirement and the credit union is not planning to require a signature, then another consideration could be for the credit union to remove the signature fields (including through a request to any applicable forms vendor), to better align with the no signature required procedures.

Final FOM Rule Has Arrived

The NCUA’s modernized FOM rule from July 30th was finally published today in the Federal Register. The final rule allows applicants to designate a Combined Statistical Area (CSA) as a well-defined local community if the population is 2.5 million or less; provides additional explanation to support the elimination of a requirement to serve the core area of a Core-Based Statistical Area (CBSA); and adds an explicit provision regarding potential discrimination in the FOM selection for a CSA and CBSA. The new rule will be effective October 14, 2020.

About the Author

Janice Ringler, NCCO, NCBSO, Regulatory Compliance Counsel, NAFCU

Janice Ringler, NCCO, NCBSO, Regulatory Compliance Counsel, NAFCUJanice Ringler, NCCO, NCBSO, joined NAFCU as regulatory compliance counsel in May 2020. In this role, Ringler helps credit unions with a variety of compliance issues.

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