VIDEO: TRID Optional Signature Line
In this Compliance Clip (video), Adam discusses the requirements for having a signature line on the LE and CD. While many financial institutions may not have thought about whether this is required or not for some time, it might be a good idea to revisit the rules to ensure things are being done correctly.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about the optional signature line on TRID disclosures. The question we have here is this: Can a creditor require a consumer to sign and return the Loan Estimate or the Closing Disclosure? In other words, can we have a signature line on the Loan Estimate and can we have a signature line on the Closing Disclosure, or maybe you're wondering if a signature line is even optional? So let's take a look at where the answer for this comes from.
The answer of course comes from the TRIP-RESPA Integrated Disclosures Frequently Asked Question No. 1 which talks about the optional signature line and it also comes directly out of Regulation Z in Section 1026.37. So let's take a look at a couple of excerpts that talk about this and give us the answer to our question.
First and foremost, it is important to understand that the signature line is optional, it's not required. So if your financial institution doesn't require the signature line, that's okay. But we'll take a look at some of the requirements if you don't offer the signature line
Here's what Regulation Z says in Section 1026.37(n). It says this, “The creditor may include a line for the signatures of the consumers in the transaction, under the master heading of the Loan Estimate form and under the heading Confirm Receipt.” So for the Loan Estimate, this is where our rules are coming from. You are permitted to include the signature line.
Now it says here that if the creditor includes a line for the consumer signature, a disclosure must be written above the signature line, and this disclosure must say that “By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form.” If your financial institution has a signature line on your Loan Estimate, make sure that this disclosure is listed above the signature line, because this is a requirement of Section 1026.37(n) of Regulation Z.
Now they go on to say that if the creditor does not include a line for the consumer’s signature, the creditor must disclose the following statement under the heading “Other Considerations”, labeled “Loan Acceptance.” So, if you do not have a signature line, you should have this disclosure. A disclosure that says, “You do not have to accept this loan because you have received this form or signed a loan application.”
Rules are slightly different whether you have a signature line or you do not have a signature line specifically on the Loan Estimate, but the rules of course for the Closing Disclosure are substantially similar and essentially the same thing.
Now, we take a look at 1026.37(o)(1)(i) and 1026.38(t)(1)(i). The rules say this, “The creditors shall make the disclosures required by this section clearly and conspicuously in writing and in a form that the consumer may keep. The disclosures shall be grouped together and segregated from everything else.” So the key there is that the disclosures must be provided in a form the consumer may keep because Optional Signature Line Frequently Asked Question No.1 gives us an example of what is a form the consumer may keep. Because if you're requiring a signature line and you're requiring them to return that form, you may be violating this rule.
Frequently Asked Question No. 1 says this, “A creditor may require a consumer to return a signed copy of the closing disclosure.” So you're permitted to return a signed copy of a Loan Estimate and you're permitted to require a signed copy of the Closing Disclosure. It's not required, but it is permitted. However, if you do this Frequently Asked Question No. 1 says, :The creditor must ensure that the consumer receives at least one copy of the closing disclosure in a form that the consumer may retain, no later than three business days before consummation.” And of course, the rules for the Loan Estimate are substantially similar. Consumers must receive a copy of the form that they may keep. You can't require them to return all the copies.
That goes on to say that if the consumer receives only one copy of the Closing Disclosure, which would also apply to the Loan Estimate, and the creditor requires a consumer to sign and return that copy then the consumer has not received the disclosure in the form that the consumer may keep. So, if you're requiring a signature on your Loan Estimate or Closing Disclosure, make sure you're complying with these rules. If you're not requiring a signature, make sure you have the proper disclosure listed.
That's it for this Compliance Clip. It's kind of a deep dive into TRID going over one of the finer points of trade that we've probably not thought about in some time, but I always think it's a good idea to revisit some of these rules. So make sure you're doing this correctly in your financial institution.