Insights

How many versions of the TILA disclosure do you provide to the consumer? In a mortgage transaction, a creditor typically delivers at least three versions, one at application, one to comply with the MDIA timing rules if the APR changes, and one at closing. If the terms change multiple times, a creditor may deliver a sack full of TILA disclosures during the application process. Many creditors make the consumer sign each of the early versions at the closing so they have a signed acknowledgement to prove that the earlier versions had, in fact, been delivered. So, a consumer might be asked to sign two or three or more versions, in addition to the final version dated the date of the closing. Does this process confuse a consumer? One wouldn’t think so, particularly if the earlier versions are each dated the date they were sent and the final version is dated the date of the closing. But, at least one federal court thinks that you should explain to the consumer why you are asking the consumer to sign multiple versions and make sure the consumer understands that only the final version actually matters.

Martha Young refinanced her home on July 19, 2007. At the closing, the closing agent presented her with three versions of the federal box disclosures. One was dated July 2, 2007, one was dated July 10, 2007, and one was dated the date of the closing. Young signed each one. The closing agent put the final version in the package of documents Young took home and retained the other two. Each of version contained different information. The final disclosure was accurate and complete. The court does not say this, but the earlier versions were presumably copies of disclosures delivered to Young during the application stage that the creditor wanted signed for recordkeeping purposes. The loan was eventually assigned to One West Bank, FSB. Young sued One West in the U.S. District Court for the District of Oregon to rescind the loan and for damages under TILA. One West moved for summary judgment. One West argued that the creditor complied with TILA because the final version was accurate. The court denied the motion. The court found that the creditor failed to provide “clear and conspicuous” disclosures of the final loan terms. The court said that nothing on the record indicated that the creditor attempted to explain why Young was asked to sign different versions of the disclosure. According to the court, a reasonable consumer would not notice and understand the information in the final disclosure because the consumer was asked to sign several versions at the same time without any explanation of why she received different versions.

So, if you require a borrower to sign acknowledgments of receipt for the early disclosures when you close a loan, be sure to explain that only the version dated the closing date matters.

See Young v. One West Bank, FSB, 2012 U.S. Dist. LEXIS 46561 (D. Or. March 30, 2012).

Timothy P. Meredith is a partner in the Maryland office of Hudson Cook, LLP. Tim can be reached at 410-865-5404 or by email at tmeredith@hudco.com.