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Legally speaking: Will pre-qualification letters become extinct?

By Lorie Garland, OAR Assistant Vice President of Legal Services

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This one involves the new disclosure requirements that are coming into effect… 

Q: On October 3rd — when the new requirements brought about by the integration of the RESPA and TILA regulations go into effect — are lenders able to provide pre-qualification letters?

A: Yes, according to the Consumer Financial Protection Bureau (CFPB), the agency that regulates the new requirements. The TILA-RESPA Integrated Disclosure Rule (TRID) requires lenders to provide a Loan Estimate within three business days after receiving an application from a consumer. An application is made when the lender receives six pieces of information from the consumer. Those six items are the consumer’s name, social security number, income, address of the property, estimated value of the property and the loan amount sought.

According to the CFPB, if a consumer provides documentation and requests the lender to review the information and provide a pre-qualification letter the lender is not prohibited from doing so. The Loan Estimate is not required until all six items have been received by the lender. Most likely a lender’s requirements to issue a pre-qualification letter would not require all six items. For example, if five of the items have been received (all except the property address) a pre-qualification letter could be issued without triggering the requirement for a Loan Estimate.

For more information on what REALTORS need to know about the CFPB rules, click here.

Tags: legal, Legally Speaking