What, specifically, needs to be reviewed with the borrower during the borrower acknowledgement conversation, and what is meant by the acknowledgment being “memorialized”?
The purpose of the borrower acknowledgement provision is to confirm orally after receiving the Closing Disclosure that the borrower understands both the key features of the loan and that the attorney-in-fact has the ability to contractually bind the borrower to the transaction – including the purchase of a home – on the same basis as if they had signed themselves.
Key features of the loan would include such things as principal amount, interest rate and adjustment provisions (if applicable), first payment date, loan term, and initial loan payment (P&I and PITIA).
The conversation reflecting the acknowledgment by the borrower(s) must be documented either in a written record created by the lender or settlement agent or in a recording capturing the conversation with the borrower. If documented in writing, there is no expectation that the borrower sign the memorialization. In either case, the lender must retain the acknowledgement in the loan file, and make it available to us on request.
For more information, refer to the published Lender Letter LL-2020-03, Impact of COVID-19 on Originations.