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Impact of New MDIA Rules on Delivery of TILA Disclosures
 

Impact of New MDIA Rules on Delivery of TILA Disclosures

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The new 3/7/3 Rule provides consumers defined time periods to review disclosures from their lenders. While the amendments provide additional protections to the consumer, they may postpone their ...

The new 3/7/3 Rule provides consumers defined time periods to review disclosures from their lenders. While the amendments provide additional protections to the consumer, they may postpone their closing date and the ability to receive funding for their mortgage on the day they originally planned for closing.
eOriginal SmartSign® Web electronic signature and vaulting solution enables lenders to reduce the delivery time from 3 days to the same day by electronically delivering the mortgage loan disclosures in real time and capturing evidence of receipt by the consumer.
Shortening the distance from application to closing, electronic transmission and delivery of disclosures streamlines the workflow process, assuring both the consumer and the lender of the timeliest closing.

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Impact of New MDIA Rules on Delivery of TILA Disclosures Impact of New MDIA Rules on Delivery of TILA Disclosures Presentation Transcript

  • Impact of New MDIA Rules on Delivery of TILA Disclosures eOriginal, Inc. The Warehouse at Camden Yards Baltimore, MD http://www.eoriginal.com September 3, 2009
  • Web Cast Agenda
    • Welcome, Introductions and Administrative Notes
    • Introduction to the New MDIA Rules and Their Impact
    • Discussion with Margo Tank and Steve Bisbee
    • Live Audience Q&A
    • Conclusion, Wrap up, and Follow Up
  • About eOriginal
    • Who we are
      • Formed in 1996, eOriginal is a technology pioneer and a leading provider of electronic signature and transaction management solutions enabling secure, document–centric business processes producing enforceable electronic agreements and documents
    • Our Solutions
      • eOriginal provides flexible and scalable electronic signature and vaulting solutions including the eCore ® enterprise software products and the web-based eCore ® On Demand software-as-a-service (SaaS) offering. Both eCore and EOD provide the eOriginal SmartSign ® capabilities for legally binding electronic signatures and documents that are tamper–evident and auditable. eOriginal technology provides compliance for managing electronic signatures and transferable records under federal and state laws and regulations.
    • Our Experience
      • eOriginal has enabled the secure, verifiable delivery of mortgage and other financial industry documentation for over a decade. eOriginal’s eSignature and eVaulting solutions have executed millions of signatures and protect billions of dollars in high-value digital documents for financial services and commercial clients.
  • Panelists
    • Margo H. K. Tank is a partner of BuckleySandler LLP. Ms. Tank advises financial services providers structure online business programs in compliance with the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA), and other state and federal laws governing electronic financial services transactions, including laws related to privacy and data security, electronic record management, e-discovery and payments. Ms. Tank is also the Co-Reporter for SPeRS (Standards and Procedures for Electronic Records and Signature)
    • Stephen F. Bisbee is the co-inventor of the eOriginal ® process and President and CEO of eOriginal. For several years, Mr. Bisbee played a leadership role among the American Bar Association committees establishing the legal standards for electronic commerce. His involvement in those forums has been invaluable in the design of the eOriginal products and in gaining recognition of eOriginal as a leader in the implementation of legal, fully electronic, business-to-business commerce. Mr. Bisbee is also Chairman of ESRA, the Electronic Signatures and Records Association.
  • “ Take Aways”
    • How can electronic delivery of disclosures allow lenders to reduce the required three day delivery period to same day?
    • How does an electronic disclosure delivery and signature solution accelerate collection of application, appraisal and other fees ?
    • What are the strategies for meeting the 3/7/3 Rule's electronic receipt requirements?
    • How do we comply with ESIGN under the new rules?
    • What are the other cost savings factors for "going electronic" in addition to closing the gap on disclosures and re-disclosures?
  • Overview of MDIA
    • Recent congressional amendments to Truth in Lending Act (TILA) known as the Mortgage Disclosure Improvement Act of 2008 (MDIA) (and as amended in October 2008) have been included in a final rule amending Federal Reserve Regulation Z.
    • Known as the “3/7/3 Rule”, these amendments went into effect July 30, 2009 and have a significant compliance impact on the operations of home loan lenders, mortgage and real estate brokerages, title and real estate agents, and others in the loan process.
    • The new 3/7/3 Rule provides consumers defined time periods to review disclosures from their lenders.
    • While the amendments provide additional protections to the consumer, they may postpone the closing date and the ability to receive funding for their mortgage on the day they originally planned for closing.
  • Key Components of New Rules
    • The initial Truth in Lending Statement must be delivered to the consumer/borrower within three (3) business days of the receipt of the loan application by the lender.
    • Upfront fees cannot be collected (except for a credit report fee) until the initial disclosures are received by the borrower. The regulations provide guidelines that deem disclosures to be received three (3) full business days after mailing.
    •  
    • The 3/7/3 Rule also requires a seven (7) business day waiting period, once the initial disclosure is provided before closing a home loan.
    • If the APR changes by more than 0.125 percent on the initial Truth in Lending disclosure, the lender must provide a corrected TIL disclosure to the borrower and wait an additional 3 business days before closing the loan.
  • DealerTrack Screen Shots
    • Longer sales/closing cycles due to increased time limits established within new rules
    • Increased amount of documents needed to be printed, faxed, and shipped. TIL documents may need to be sent multiple times, increasing costs associated shipping your documents
    • More documents will need to be tracked, processed and filed. Meaning more of your and your teams time will be focused on administrative tasks
    • Risk of delayed or cancelled closings
    • More costs passed on to lenders and brokers
    Implications of the New Rules
  • Early TILA Disclosure May Be Delivered Electronically
    • The Federal Reserve Board did not adopt separate rules or presumptions regarding the delivery of disclosures by electronic transmission or other means.
    • The Rule allows for delivery of the TILA statement electronically consistent with the ESIGN Act; provided that the lender can provide “evidence of receipt” of the loan disclosure by the consumer.
    • When an application fee may be charged and when the time periods start to run is dependent on when the consumer receives the early TILA.
  • RESPA Implication
    • Under Regulation X, as amended by HUD effective January 1, 2010, a loan originator (either lender or broker) must not collect any fees, aside from a reasonable credit report fee, until after the applicant has received the GFE.
    • HUD’s FAQs, however, appear to take the restriction on the collection of fees even further. HUD states the following:
      • Q: At what point can a loan originator charge a loan applicant fees for services other than the cost of obtaining a credit report?
      • A: After a loan applicant both receives a GFE and indicates an intention to proceed with the loan covered by the GFE. (emphasis added)
    • Conflict may arise regarding the collection of fees at the outset of a mortgage loan transaction between the new RESPA rules and the MDIA rules.
  • Electronic Delivery and Receipt Rules – How to Comply
    • Key Compliance Issues are Simple:
    • ESIGN Consumer Consent
    • Evidence of Receipt by the Consumer
    • Consumer Consent required:
      • ESIGN is an “opt-in” statute
      • 3 Step Process:
        • Disclosures
        • Affirmative Consent
        • Reasonable Demonstration
    ESIGN Consumer Consent Provision (ESIGN 101(c))
  • Consumer Consent Disclosure Requirements
      • Prior to obtaining a consumer’s consent, the electronic record provider must deliver a clear and conspicuous statement informing the consumer of:
      • Any right or option of the consumer to have the record provided or made available in paper form;
      • The right of the consumer to withdraw consent and any conditions or consequences (which may include termination of the parties’ relationship) of such a withdraw;
      • Whether the consent applies (i) only to the particular transactions which give rise to the obligation to provide the record, or (ii) to all identified categories of records that may be provided during the course of the parties’ relationship;
      • The procedures the consumer must use to withdraw consent and to update information needed to contact the consumer;
      • How the consumer may after consenting, upon request, obtain a paper copy of the electronic record and whether any fee will be charged for such a copy; and
      • The hardware and software requirements for access to and retention of the electronic records.
  • Electronic Affirmative Consent
    • The consumer must consent electronically or confirm consent electronically and
    • The sender must reasonably demonstrate that the consumer can access the information on the electronic form that will be used to provide the information that is the subject of the consent.
  • Strategies for Meeting the Reasonable Demonstration Test
    • Need to consider delivery methods and formats (e.g., email or web and html or pdf).
    • Strategies to meet reasonable demonstration test:
        • Self-reporting – use with caution – best suited for existing customer relationships and popular formats where “reader” software is freely available (e.g. Acrobat PDF);
        • HTML;
        • Test file/report success or failure;
        • Use of code in file;
        • Email “no bounce back”; and
        • The email/embedded hyperlink.
  • Strategies for Compliance with MDIA and RESPA “Receipt Rules”
    • Examples of documentation of receipt (and intention to proceed with the loan transaction) that may be able to demonstrate that the consumer received the disclosure within the required time frame:
    •  
      • A copy of an e-mail response from the consumer stating that the consumer has received the disclosure.
      • An email read receipt message or a certified email receipt message.
      • A copy of an acknowledgement and receipt faxed by the consumer stating that the consumer has received the disclosure.
      • Evidence that the consumer has accessed the disclosure from a secure website.
      • A telephone recording of consumer acknowledgement of receipt.
    • Faster Delivery. eOriginal enables lenders to reduce the delivery time from 3 days to the same day by electronically delivering the mortgage loan disclosures in real time and capturing evidence of receipt by the consumer.
    • Quicker Fee Collection . By delivery of the initial TILA disclosure as soon as it is available, eOriginal accelerates the ability of lenders to collect the fees necessary to actually begin the loan approval and closing process. e.g., appraisals, surveys, reports, etc. even to the same day as the application.
    • Quicker Closing. Surpassing the “3 days after mailing” presumption of delivery, eOriginal accelerates the ability to close by enabling lenders to deliver the initial TILA disclosure as soon as it is available
    • Quicker APR Cure. Avoiding the 3 day presumption of delivery of redisclosures, eOriginal accelerates the ability to close by enabling lenders to deliver the TILA redisclosure as soon as it is available,
    • Costs Savings Beyond Just Quick . Cost and expense reductions from the preparing and copying the disclosures, the mailing or overnight courier fees, the cost of staff for tracking and follow up of the delivery and possible fines that may accrue for delayed closings.
    How Can eOriginal Help with New MDIA Compliance?
  • Impact of New MDIA Rules
    • Live Audience Q&A
    • Conclusion, Wrap up, and Follow Up
  • For Further Information
    • Stephen Walker
    • Sales & Marketing Manager
    • 410-625-5162
    • [email_address]
    • www.eoriginal.com
    • For weekly and real-time updates, please visit our blog at blog.eoriginal.com
    • Follow us on Twitter @eOriginal
    • Find us on Facebook at
    • Margo H. K. Tank, Esq.
    • BuckleySandler LLP.
    • (202) 349-8050
    • [email_address]
    • www.buckleysandler.com