Evidence of intent to proceed with loan application

If no costs are charged to the customer until the day of loan closing, is there a need to document the customer's intent to proceed? Would it be a sound argument that the customer's presence at loan closing is their intent to proceed?

This question has appeared here before:

As that thread asks, what's the hangup over documenting intent? And why would a bank want to incur costs that it might not be able to recover from the consumer?

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John S. Burnett
Bankers Online .com
Fighting for Compliance since 1976
Bankers' Threads User #8

Our Bank is similar in that we very rarely collect any fees from a borrower prior to closing. We explored the Intent to Proceed (ITP) at great length. After reading the regulation 1026.19(e)(2)(i)(A), commentary and Section by Section analysis we are going to implement ITP and here is why:

Intent to Proceed (ITP). Given the information provided in the regulation, the commentary and the analysis, it is clear to me that until the consumer has communicated an ITP, the lender cannot “impose a fee” onto the borrow and by doing may impede the borrowers ‘shopping and comparison’ and that the consumer may determine ‘that too much cost has been expended on a particular loan estimate to continue shopping even though the consumer believes more favorable terms could be obtained from another lender.’

If we send the CD before the consumer expresses their ITP, we are most certainly ‘imposing a fee’ by providing the consumer a document that by definition is to “contain the actual terms and costs of the transaction”; we have in essence made the decision for the borrower which is direct opposition to the CFPB’s analysis above.

That is our interpretation and reasoning for implementing ITP; others may have a differing viewpoint.

Documenting the intent to proceed?? You have absolutely no choice in the matter - it has to be documented:

19(e)(2) Predisclosure activity.

19(e)(2)(i) Imposition of fees on consumer.

19(e)(2)(i)(A) Fee restriction.

2. Intent to proceed. Section 1026.19(e)(2)(i)(A) provides that 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. However, a consumer's silence is not indicative of intent because it cannot be documented to satisfy the requirements of § 1026.25.

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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Out of curiosity, how is everyone documenting “intent to proceed” if it is taken orally? Maybe I’m being pessimistic but if a customer declares their intent to proceed over the phone and the loan officer documents it in the file and later the customer decides to withdraw their request for whatever reason - it would be our word against theirs that they spoke the words “we intend to proceed with the loan” wouldn’t it? And in this case, we could be stuck with an appraisal fee, right? I know that we can require written intent but I think management is going to have a fit if I introduce another document into the mortgage file arena. I’m thinking they will lean towards simply having the lender document the customer’s intent at the top of an application. Do I just need a vacation?

Maybe a long weekend?

I understand both sides of the argument. Management should assess the risk of being confronted by the scenario you are concerned with before blindly saying "annotate the file." But if your procedure includes a statement to the applicant that "That's wonderful! Just send your check for $XXX.XX for the appraisal (or give us the OK to charge your account for it), and we'll get moving on your application." There is no reason you should feel it necessary to hold off on collecting for the appraisal (unless you're already planning to waive the fee) until the closing.

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John S. Burnett
Bankers Online .com
Fighting for Compliance since 1976
Bankers' Threads User #8

We are dealing with this in two ways. 1. We are going to document the intent electronically for those customers who are signed up to receive documentation electronically. This is a service being provided by our e-delivery provider. 2. If the borrowers decline electronic communication, we are actually having one of the borrowers sign a form indicating an intent to proceed. This is how we plan to roll out and will evaluate the process again down the road should it become an obstacle.

I particularly like that you "will evaluate the process again down the road." This is a sea-change for everyone involved, and there's nothing to prevent technological change or discovery of best practices that could result in modifying procedures as the industry becomes accustomed to the new regulatory regime.

If and when eClosings become a viable option, you can expect that there will be another significant change in the overall process.

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John S. Burnett
Bankers Online .com
Fighting for Compliance since 1976
Bankers' Threads User #8

Thank you John! We are trying to pull it all together and yet remain "fluid" as we endeavor beyond implementation.

Thank you John! We are trying to pull it all together and yet remain "fluid" as we endeavor beyond implementation.

May I ask what you have been doing up until now? Intent to proceed is not new. I am just curious.

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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

To my understanding, the need to document is new to this process.

The need to document the joint intent is not new. From the Commentary to 1002.7(d):

3. Evidence of joint application. A person's intent to be a joint applicant must be evidenced at the time of application. Signatures on a promissory note may not be used to show intent to apply for joint credit. On the other hand, signatures or initials on a credit application affirming applicants' intent to apply for joint credit may be used to establish intent to apply for joint credit. (See Appendix B.) The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information. For example, signatures on a joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.

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The opinions expressed are mine and they are not to be taken as legal advice.

I was not thinking we were discussing joint intent. I was talking about the intent to proceed. We have always documented the joint intent. Sorry for the confusion.

And there really isn't anything new about the need to document an applicant's intent to proceed with a mortgage application, either. The requirement has been with us since the big RESPA overhaul of 2010. Consider Regulation X section 1024.7(a)(4): http://www.bankersonline.com/regs/12-1024/12-1024-007.html

What IS different is the spread of the reach of the rule to include non-RESPA loans.

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John S. Burnett
Bankers Online .com
Fighting for Compliance since 1976
Bankers' Threads User #8

My mistake - got off on the wrong path. But - from 1024.7 -

. . . The lender may not charge additional fees until after the applicant has received the GFE and indicated an intention to proceed with the loan covered by that GFE. . . .

If you did not document the intent then how did you show you had the authority to collect your fees. The MLO should have been documenting in the file they received the "verbal" intent.

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The opinions expressed are mine and they are not to be taken as legal advice.