HELLLLLP
So our QC auditing firm (preclose) has an issue with how we document applicants receiving their disclosures. We have documented in our procedures that we utilize a checklist in which the lender dates and initials all of the documents the applicant receives when the are disclosed. We call it the regulatory checklist. We also keep copies of the documents in our files. They don't like this method. They would rather the customer signs and dates these disclosures. Things like the home loan toolkit and/or the LE documents. To me this is outside of what is required from the regulation.

So maybe we do have this all wrong and the regulatory checklist we use is bumpkis, how do you all document receipt of disclosures by the applicant(s).

Hi Bec,

when you say "document applicants receiving their disclosures" do you mean just receiving the receiving the initial LE by mail, providing and documenting receipt of in-person disclosures, or documenting receipt of disclosures prior to the three day mailbox rule? Here are the sections of the reg they may be referring to, but it depends on which of the above scenarios you are referring to.

If they are only referring to receipt of the initial LE by mail, refer them to 19(e)(1)(iv) and tell them there is no requirement under the reg. The consumer is assumed to have received the disclosures three business days after they are placed in the mail.

You may however want to check with your investor requirements as they may differ. good luck!

§1026.19(e)(1)(iv)

19(e)(1)(iv) Receipt of early disclosures.


1.Mail delivery.
Section 1026.19(e)(1)(iv) provides that, if any disclosures required under § 1026.19(e)(1)(i) are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail. The creditor may, alternatively, rely on evidence that the consumer received the disclosures earlier than three business days. For example, if the creditor sends the disclosures via overnight mail on Monday, and the consumer signs for receipt of the overnight delivery on Tuesday, the creditor could demonstrate that the disclosures were received on Tuesday.





§1026.19(f)(1)(iii)

Official Interpretation:

1.Mail delivery.
Section 1026.19(f)(1)(iii) provides that, if any disclosures required under § 1026.19(f)(1)(i) are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail. If the creditor delivers the disclosures required under § 1026.19(f)(1)(i) in person, consummation may occur any time on the third business day following delivery. If the creditor provides the disclosures by mail, the consumer is considered to have received them three business days after they are placed in the mail, for purposes of determining when the three-business-day waiting period required under § 1026.19(f)(1)(ii)(A) begins. The creditor may, alternatively, rely on evidence that the consumer received the disclosures earlier than three business days after mailing. See comment 19(e)(1)(iv)–1 for an example in which the creditor sends disclosures via overnight mail.



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).

What is their legal basis?

For mail-aways, we used to list the documents in the cover letter, and there was never any issue. The problem with the signing, is you will always have internal exceptions which are not regulatory exceptions. Many places are getting away from paper in the file if it is also on the computer and retrievable.

Specific examples included the Home Loan Tool Kit and then the mailing of the other disclosures.
Thank you for the citations!!
Rocky, exactly...it feels like they are pushing hard for customer's to sign the disclosures, but the regulation does not require that.
We have given our procedures but they keep pushing and listing these things as findings on our audit reports! Insignificant, but findings none the less and our reports to senior management are being met with less and less patience.

Again, what is the legal basis for their citation. Ask them to quote it so the bank can identify and if necessary rectify the situation.

If not, my recommendation to the Audit Committee is they are wasting a lot of bank time and citing us for no reason. Can we shop for another?

Time for a new firm. This is not a valid finding, nor even a legitimate best practice. If it finds its way into one more report, it will be the last report and we will be seeking a new firm.

Amen Just Jay! We use a document checklist and list the disclosures in a cover letter with copies in the file. Additionally, we include the intent to proceed form for their signature. If we receive the form back with signature then you can't argue they didn't get all other disclosures as well.

Agree. Time to get a new company if they don't back down.

Auditors who believe in overkill are anathema. If you adopted their position as policy, you're setting yourself up for scores of technical fouls at the next audit and complicating your post closing checks. Then you'be be getting dinged for every slip when an unsigned disclosure sneaks through.

Repeat this mantra -- Auditors recommend. Management decides.

Thank you all so much for responding. Some excellent food for thought!

If hired external reviewers can't cite a reg or define some other type of risk, they're wasting your time.