Compliance Blog

Written by Brandy Bruyere, Regulatory Compliance Counsel

August 1^st is eighty days away—that’s just two months and 19 days. Somehow, that TILA/RESPA deadline that seemed so far off is now right around the corner. As credit unions continue the implementation process, some are reviewing procedures for having outside mortgage brokers provide the Loan Estimate on the credit union’s behalf. How does this work?

Under section 1026.19(e)(1)(ii), if a mortgage broker receives a consumer’s application, either the mortgage broker or the credit union must provide the consumer with the Loan Estimate. However, where the mortgage broker provides the Loan Estimate, “[t]he creditor shall ensure that such disclosures are provided in accordance with [1026.19(e)].” Here is the rule and its relevant CFPB staff commentary:

“(e) Mortgage loans secured by real property—early disclosures. 

[…]

(ii) Mortgage broker. 

(A) If a mortgage broker receives a consumer's application, either the creditor or the mortgage broker shall provide a consumer with the disclosures required under paragraph (e)(1)(i) of this section in accordance with paragraph (e)(1)(iii) of this section. If the mortgage broker provides the required disclosures, the mortgage broker shall comply with all relevant requirements of this paragraph (e). The creditor shall ensure that such disclosures are provided in accordance with all requirements of this paragraph (e). Disclosures provided by a mortgage broker in accordance with the requirements of this paragraph (e) satisfy the creditor's obligation under this paragraph (e).

 […]

19(e)(1)(ii) Mortgage broker.

[…]

2. Creditor responsibilities. If a mortgage broker issues any disclosure required under §1026.19(e) in the creditor's place, the creditor remains responsible under §1026.19(e) for ensuring that the requirements of §1026.19(e) have been satisfied. For example, if a mortgage broker receives a consumer's application and provides the consumer with the disclosures required under §1026.19(e)(1)(i), the creditor does not satisfy the requirements of §1026.19(e)(1)(i) if it provides duplicative disclosures to the consumer. In the same example, even if the broker provides an erroneous disclosure, the creditor is responsible and may not issue a revised disclosure correcting the error. The creditor is expected to maintain communication with the broker to ensure that the broker is acting in place of the creditor.”

(Emphasis added)

In other words, the credit union is responsible for any errors in the Loan Estimate that is provided by the broker on the credit union’s behalf, which includes being bound by the tolerances for fees. The credit union would not be able to issue a revised Loan Estimate to correct any errors made by the mortgage broker. Rather, revised Loan Estimates are limited to the existence of a “changed circumstance” and the rule’s limitations of such changes in making any adjustments.

Also, because the special information booklet required by section 1026.19(g) must be delivered or placed in the mail “not later than three business days after the consumer’s application is received,” then “if the consumer uses a mortgage broker, the mortgage broker shall provide the special information booklet.” See, 12 C.F.R. 1026.19(g)(1)(i).

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CFPB to Host Fifth and Final TILA/RESPA Webinar. On Tuesday, May 26, at 2 PM EDT, the Federal Reserve will host the CFPB’s fifth and final webinar clarifying questions relating to the interpretation and implementation of TILA/RESPA. You can register for the free webcast here. 

If you missed any of the previous CFPB webinars and would like to watch them, they are available here.

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Sleepy Baby. Apparently Nolan did take after me in some respects—when he needs to sleep, he is down for the count!