By: Kari Osier, Compliance Specialist
We don’t receive many TILA-RESPA questions, but I received the following question last week:
If a borrower does not use your credit union for a mortgage loan, is the credit union not allowed to charge the borrower for an appraisal that it ordered?
The regulation that answers this question is Regulation Z and the language that pertains to it is contained in Section 1026.19 —
1026.19 Certain mortgage and variable rate transactions
(2) Predisclosure activity. (i) Imposition of fees on consumer. (A) Fee restriction. Except as provided in paragraph (e)(2)(i)(B) of this section, neither a creditor nor any other person may impose a fee on a consumer in connection with the consumer’s application for a mortgage transaction subject to paragraph (e)(1)(i) of this section before the consumer has received the disclosures required under paragraph (e)(1)(i) of this section and indicated to the creditor an intent to proceed with the transaction described by those disclosures. A consumer may indicate an intent to proceed with a transaction in any manner the consumer chooses, unless a particular manner of communication is required by the creditor. The creditor must document this communication to satisfy the requirements of § 1026.25.
(12 CFR 1026.19(e)(2)(i)(A)).
So, a credit union may not impose any fee for application, appraisal, underwriting or otherwise until: (1) the borrower has received the Loan Estimate and (2) the borrower has indicated intent to proceed with the transaction. The only exception to this relates to credit reports.
Per the official interpretations to this section, a fee is considered “imposed” when the borrower must provide a method of payment, even if the payment is not made at that time. For example, when the credit union takes the borrower’s check or a credit card number for a $500 processing fee even if the credit union states it will not deposit the check for collection or charge the credit card account until after delivery of the loan estimate, the fee is considered imposed. Official Interpretations, 12 CFR 1026.19(e)(2)(i)(A) – comment 5.
Further, a borrower may indicate intent to proceed in any manner, unless the credit union requires a particular method of communication. Per the official interpretations, the type of communication that is allowed for the purpose of intent are: in-person; verbal communication immediately upon delivery of the loan estimate; verbal communication by phone; e-mail communication; or, signing a preprinted form. These methods of communication are all sufficient to indicate intent to proceed, as long as the actions occur after receipt of the loan estimate and the credit union documents the communication. Silence is not acceptable because it cannot be documented. Official Interpretations, 12 CFR 1026.19(e)(2)(i)(A) – comment 2.