Question: We know about the seven-day waiting period requirement between providing the initial disclosures and consummation. We need to know the criteria to use in order to determine if the consumer may waive the waiting period based on a personal emergency? And if a consumer can waive the waiting period, how is this done?
Answer
For a closed-end credit transaction that is secured by the consumer’s dwelling and subject to RESPA (excluding timeshares), the creditor must deliver or place in the mail the initial TILA disclosure no later than the seventh business day before consummation of the loan transaction. [12 CFR § 226.19(a)(2)(i)] The waiting period commences when the creditor delivers or places the disclosures in the mail, and not when the consumer receives or is deemed to receive the disclosures.
If the extension of credit is necessary to meet a “bona fide personal financial emergency,” the consumer may modify or waive the waiting period after receiving the initial TILA disclosures. [12 CFR § 226.19(a)(3)]
What constitutes a bona fide personal financial emergency is a matter of some consternation, because it is not statutorily defined for purposes of waiving the waiting period, even though the emergency must be one that needs to be met before the end of the waiting period. [12 CFR Supp. I to 226, Official Staff Commentary § 226.19(a)(3)-1]
Whether an emergency rises to the level of a bona fide personal financial emergency—obviously a higher, yet undefined standard—is determined on a case-by-case basis. There are illustrations of such events, but circumstances can vary. It would be prudent to take a narrow view of what may qualify as a bona fide personal financial emergency.
Nevertheless, if a decision has been reached that the consumer is faced with a bona fide personal financial emergency and, therefore, may waive the seven business day waiting period, each consumer who is primarily liable on the legal obligation must give the creditor a dated, written statement that describes the emergency, specifically modifies or waives the waiting period, and bears the signatures of all the consumers who are primarily liable on the legal obligation. Printed forms may not be used for a consumer to waive the waiting period. [12 CFR § 226.19(a)(3); 12 CFR Supp. I TO 226, Official Staff Commentary § 226.19(a)(3)-1]
Jonathan Foxx is president and managing director of Lenders Compliance Group, Brokers Compliance Group, Servicers Compliance Group and Vendors Compliance Group, national companies devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted by phone at (516) 442-3456, by e-mail at [email protected] or visit www.LendersComplianceGroup.com.
