What is the timing requirement for providing the CHARM Booklet and ARM Program Disclosures when a consumer applies in person? Can they be sent out with the other 3-day disclosures?

The commentaries for both disclosures say that "Disclosures must be given at the time an application form is provided or before the consumer pays a nonrefundable fee, whichever is earlier."

I believe that the statement saying "at the time an application form is provided" refers to situations where a consumer receives a blank application form, not when the lender fills one out in the consumer's presence but doesn't give the consumer a copy. Ami I correct?

Thanks,

Larry

Somebody asks for an application, they get the other documents with the blank application form.

Does that mean it can it be sent with the other disclosures within 3 business days in the scenario I described?

Thanks,

Larry

That is an in-person application - regardless of who is writing information on the application form. Once the officer determines they are taking an ARM or HELOC application, they must hand them the early disclosures and the brochure.

It sounds like you two have differing views on this. I had generally thought that the disclosures must be provided at the time of an in-person application. But upon re-reading the reg it doesn't seem to say that. The reg itself doesn't address the timing, and the commentary only says " Disclosures must be given at the time an application form is provided or before the consumer pays a nonrefundable fee, whichever is earlier." Many lenders don't actually print out a copy of the application form during an in-person application.

I think you are reading it a little too literally. They outline when the disclosures can be delayed in great detail, an in-person application is not one of them. You cannot get out of the early disclosures simply because you choose not to hand them a paper form.

Randy's right. If I'm in front of your loan officer and mention I'm interested in a variable rate (ARM) loan, the LO hands the program disclosure and booklet to me right now. If I'm applying over the internet, your platform has to have a way to let me download those disclosure now - not deliver them to me 3 days from now.

Larry, the CHARM Booklet and ARM Program Disclosures are shopping disclosures. They are provided so the customer can shop various institutions to find the best loan. Not to find out what they applied for in retrospect.

Good explanation Rocky.

Early HELOC disclosure rules are very detailed on when they must be provided when an application form is provided, when there is an indication on the form that it can be used for a HELOC request, or there are take-ones in lobbies available for HELOCs. But on early ARM requests, the text isn’t so clear. Say a person walks into an office and asks an employee for a blank mortage application that can be used for various types of real estate-requests, to be completed and returned (or picks-up a blank take-one application in the lobby). Do you think the early ARM disclosures need to be provided in these scenarios? I'm not so sure if the customer didn't express interest in a ARM specifically.

If the consumer expresses an interest in an ARM or the MLO has discussed the possibility of an ARM then yes the disclosure would be required.

Official Interpretation

Paragraph 19(b)(2)

1. Disclosure for each variable-rate program. A creditor must provide disclosures to the consumer that fully describe each of the creditor's variable-rate loan programs in which the consumer expresses an interest. If a program is made available only to certain customers of an institution, a creditor need not provide disclosures for that program to other consumers who express a general interest in a creditor's ARM programs. Disclosures must be given at the time an application form is provided or before the consumer pays a nonrefundable fee, whichever is earlier. If program disclosures cannot be provided because a consumer expresses an interest in individually negotiating loan terms that are not generally offered, disclosures reflecting those terms may be provided as soon as reasonably possible after the terms have been decided upon, but not later than the time a non-refundable fee is paid. If a consumer who has received program disclosures subsequently expresses an interest in other available variable-rate programs subject to 1026.19(b)(2), or the creditor and consumer decide on a program for which the consumer has not received disclosures, the creditor must provide appropriate disclosures as soon as reasonably possible. The creditor, of course, is permitted to give the consumer information about additional programs subject to §1026.19(b) initially.

4. As applicable. The disclosures required by this section need only be made as applicable. Any disclosure not relevant to a particular transaction may be eliminated. For example, if the transaction does not contain a demand feature, the disclosure required under §1026.19(b)(2)(x) need not be given. As used in this section, payment refers only to a payment based on the interest rate, loan balance and loan term, and does not refer to payment of other elements such as mortgage insurance premiums.

Dan & All, thank you for your perspectives and information.