[kmeade]

On closed-end variable-rate transactions secured by the consumer’s principal dwelling with a term greater than one year, does the provisions of 1024.6(a)(1) also apply to the initial ARM disclosure/CHARM booklet and initial HELOC disclosures/HELOC booklet if the application is denied within three business days when taken in the situations listed below?

• In-person application
• Online (web-based) application
• Mailed applications

[kmeade]

Any advice!

[jholzknecht]

Kathy,

Your question just made it to me today. I don’t fully understand the question, so let me break it down.

* It starts out with a description of an ARM – “closed-end variable-rate transactions secured by the consumer’s principal dwelling with a term greater than one year”
* Next it refers to 1024.6(a)(1) which is the requirement to provide a special information booklet on a federally related mortgage loan.

So, the question is – On an ARM transaction does the RESPA special information booklet also apply to the initial ARM disclosure/CHARM booklet and initial HELOC disclosures/HELOC booklet if the application is denied within three business days when taken in the situations listed below? That is where you lost me – does the RESPA booklet apply to the CHARM and HELOC booklet.

RESPA Section 1024.6(a)(1)generally requires a special information booklet for federally related mortgage loans. The RESPA booklet is not required:
* if a TRID booklet is provided;
* if a copy of the brochure entitled “When Your Home is On the Line: What You Should Know About Home Equity Lines of Credit” is provided for an open-end line of credit.
* for a refinancing transactions;
* for a closed-end loans, as defined in 12 CFR 1026.2(a)(10) of Regulation Z, when the lender takes a subordinate lien;
* for a reverse mortgages; and
* for any other federally related mortgage loan whose purpose is not the purchase of a 1- to 4-family residential property.

The RESPA booklet would only be required for a closed-end variable-rate transactions secured by the consumer’s principal dwelling with a term greater than one year, if the transaction was for the purchase of a dwelling. For a closed-end loan the initial HELOC disclosures/HELOC booklet is not required.

When required, the RESPA booklet must be provided not later than three business days (as that term is defined in §1024.2) after the application is received or prepared. However, if the lender denies the borrower’s application for credit before the end of the three-business-day period, then the lender need not provide the booklet to the borrower. This is true for an in-person application, an online (web-based) application, or a mailed application.

When required, a Consumer Handbook on Adjustable Rate Mortgages must be provided at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier (except that the disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application when the application reaches the creditor by telephone, or through an intermediary agent or broker). This is true for an in-person application, an online (web-based) application, or a mailed application.

As noted previously, the brochure entitled “What You Should Know About Home Equity Lines of Credit” is not required for a closed-end loan. For a HELOC the brochure must be provided at the time an application is provided to the consumer. The disclosures and the brochure may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application in the case of applications contained in magazines or other publications, or when the application is received by telephone or through an intermediary agent or broker. This is true for an in-person application, an online (web-based) application, or a mailed application.

[kmeade]

I knew there was an exclusion for the home loan toolkit if the application was denied within three days.

My question is:
When applicable (per the criteria you listed), for applications taken by phone, online, or mail, the Consumer Handbook on Adjustable-Rate Mortgages and the initial ARM disclosure are still due within three days, even if the loan is denied within three days.

and

When applicable (per the criteria you listed), for applications taken by phone, online, or mail, the “What You Should Know About Home Equity Lines of Credit” and the initial HELOC disclosure are still due within three days, even if the loan is denied within three days.

Is this correct?

[jholzknecht]

You generally don’t have three days for the CHARM booklet/ARM disclosure and the HELOC booklet/disclosure. Those items must be provided at the time you hand the consumer the blank application. They are given before you have an application and long before you make a credit decision. Previously you inquired about an in-person application, an online (web-based) application, or a mailed application. Now you have expanded the inquiry to include phone applications. In an in-person application, the disclosures and booklets are provided at the time the consumer is handed an application. For an online application the disclosure and booklet must be provided at the time the consumer accesses the application. In a mailed application, the disclosure and booklet should be included with the blank application provided to the consumer. In a phone application, as explained above, the disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application when the application reaches the creditor by telephone.

ARM rules do not address how to handle disclosures for applications denied or withdrawn in the three-day period. The safe answer is to provide the disclosure and the brochure.

For HELOCs, sin situations where §1026.40(b) permits the creditor a three-day delay in providing disclosures and the brochure, if the creditor determines within that period that an application will not be approved, the creditor need not provide the consumer with the disclosures or brochure. Similarly, if the consumer withdraws the application within this three-day period, the creditor need not provide the disclosures or brochure.

[Author]

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