[TheBank]

We are looking at implementing electronic delivery of loan documents and electronic signatures. On a TRID loan with rescission, regarding uploading the final documents, the CD and note, and right to cancel, what type of parameter is acceptable regarding how long to give the customer a chance to pick up, receive docs, and sign them? Assuming a preliminary CD was already provided 3 days prior to closing, and no changes were made to the CD, is it permissible to allow, for example, 5 days for the customer to sign? Our Right to cancel states that the rescindable time period starts on the later of the loan origination date or TIL disclosure receipt date, so we realize we would need to delay the start of the rescission period to when the customer signed the docs, with the period expiring 3 days after that.

It seems like it is reasonable to give the borrower a certain amount of time to complete the transaction, but what time frame is acceptable and what is not acceptable?

[rcooper]

I’m not sure I’m understanding the your question related to what they’re signing or the timeframe, so I’m going to offer some general info. Below are the applicable timing requirements for the CD and rescission and examples. As long as you’re following these timeframe rules you will be fine. Let us know if you still have questions.

1026.23(a)(3)(i): The consumer may exercise the right to rescind until midnight of the third business day (i.e. all calendar days except Sundays and the legal public holidays) following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last…

1026.(a)(2) To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business.

Keep in mind that the consumer could put the rescision notice in the mail to you on the third business day and you might not receive for a few days, so you would want to allow a few days after rescission to allow for the notice to be received. I believe some banks have a bank allow the customer to sign something after the end of the three days rescission period, before funding, stating that the customer didn’t rescind. This is not required by the reg and is not a waiver of the rescission time period… they use to verify that a notice wasn’t put in the mail.

1026.19(f)(1)(ii) Timing.

(A) In general. Except as provided in paragraphs (f)(1)(ii)(B), (f)(2)(i), (f)(2)(iii), (f)(2)(iv), and (f)(2)(v) of this section, the creditor shall ensure that the consumer receives the disclosures required under paragraph (f)(1)(i) of this section no later than three business days (i.e. all calendar days except Sundays and the legal public holidays)before consummation.

Comment 1026.19(f)(1)(iii):
2. Other forms of delivery. Creditors that use electronic mail or a courier other than the United States Postal Service also may follow the approach for disclosures provided by mail described in comment 19(f)(1)(iii)-1. For example, if a creditor sends a disclosure required under § 1026.19(f) via email on Monday, pursuant to § 1026.19(f)(1)(iii) the consumer is considered to have received the disclosure on Thursday, three business days later. The creditor may, alternatively, rely on evidence that the consumer received the emailed disclosures earlier after delivery. See comment 19(e)(1)(iv)-2 for an example in which the creditor emails disclosures and receives an acknowledgment from the consumer on the same day. Creditors using electronic delivery methods, such as email, must also comply with § 1026.38(t)(3)(iii). For example, if a creditor delivers the disclosures required by § 1026.19(f)(1)(i) to a consumer via email, but the creditor did not obtain the consumer’s consent to receive disclosures via email prior to delivering the disclosures, then the creditor does not comply with § 1026.38(t)(3)(iii), and the creditor does not comply with § 1026.19(f)(1)(i), assuming the disclosures were not provided in a different manner in accordance with the timing requirements of § 1026.19(f)(1)(ii).

Examples from Comment 1026.23(a)(3):
For example:

A. If a transaction is consummated on Friday, June 1, and the disclosures and notice of the right to rescind were given on Thursday, May 31, the rescission period will expire at midnight of the third business day after June 1—that is, Tuesday, June 5.

B. If the disclosures are given and the transaction consummated on Friday, June 1, and the rescission notice is given on Monday, June 4, the rescission period expires at midnight of the third business day after June 4—that is, Thursday, June 7. The consumer must place the rescission notice in the mail, file it for telegraphic transmission, or deliver it to the creditor’s place of business within that period in order to exercise the right.

[TheBank]

To clarify, assume that the E-sign Act requirements are met when the customer picks up/receives/consents at the time of the early disclosures/Loan Estimate. Also assume the CD has already been provided 3 days or more prior to loan closing/consummation/origination, and that there are no changes needed for the final CD. The documents I am asking about are the note, final copy of CD, and right of rescission provided at closing. When the customer is using electronic delivery and signing, we will send the docs electronically. How much time can we allow for the borrower to pick up/receive/sign those documents? The desire by management is to allow 5 days without refreshing the documents, without updating/changing the CD. In other words, if the note, final CD copy, and Right of rescission are sent electronically on a Monday, if the borrower electronically signs and sends back to us that day, we have actually closed the loan the date of the note and final CD. However, if the borrower does not sign on Monday, and the borrower signs on Tuesday-Friday, are we ok to use those same docs provided Monday with the Monday note and CD date, without refreshing/uploading new docs, and use Monday as the origination date for interest just as the note states when entering the loan on our core processor?

Our Right to cancel states that the 3 day period starts the later of the day the account is opened, the dat the TIL is received, or the date the right to cancel is received, so that seems to adjust forward the rescission date for us, and we would give them 3 days to rescind after signing, if not signed same day as note date.

I can understand giving the customer a day or two, because the borrower may not be available that same business day the docs are sent to them. That seems reasonable, but the desire is to allow 5 days, and I want to make sure there would be no issue with that.

[rcooper]

You’ll need to consider what your state law allows regarding e-signatures as it relates to notes. We recently heard from a member that her state bankers association has said her state law doesn’t allow esignatures for promissory notes or wills. So this is a good reminder to check state law, utilize your state bankers association as a resource, and consult an attorney. you are dealing with legal documents that could pose a great risk to the institution if not executed properly, so you want to make sure you get the process right.

As for the CD, you want to make sure you’re complying with the timeframes for when the CD is deemed received if it is emailed (see my post above). If nothing has changed on the CD you aren’t required to provide another one (unless investors require it), so assunming nothing has changed the CD would not need to updated.

And for the 5 day timing requirement, I am not aware of anything that would prohibit it. When you can begin accruing interest will also be matter of state law. Some states allow it during the rescission period and some states do not.

Again, you are dealing with legal documents that could pose a great risk to the institution if not executed properly. Consult with an attorney before you begin accepting esignatures on your notes and also regarding when the note will allow you to begin to accruing interest since there is a difference in the note date and closing date/date signed by borrower (keeping in mind any state law restrictions during the rescission period).

Let us know if you have any other questions.

[Author]

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